INDIAN 4 WHEELER MARKET IN RELATION WITH

TATA MOTORS

Submitted by: Nilesh R. Chogale

Post Graduate Diploma in Business Management

(International Business)

Roll No.: 03

2009-2011

PILLAI’S INSTITUTE OF MANAGEMENT OF MANAGEMANT STUDIES AND

RESEARCH.

Panvel, MUMBAI.
 ACKNOWLEDGEMENT

Success is a host of hard work. Behind the success of any endeavor is the inspiration. This project
owes its own success to many people.

Firstly I would like to thank ------------------, honorable----------------for giving me an opportunity to

work in --------------- whose invaluable support and guidance helped me in every aspect of this
project.

I would like to extend my thanks to ------------------------ and the entire staff members of
----------------------------- for their expert guidance and encouragement they have given me in spite of
their demanding schedule. Their informal discussion and constructive criticism has helped this
project a rewarding experience for me.

I am thankful to __________________ for his priceless and valuable inputs that helped me to frame
the essence of this project and my Co-coordinator -------------------------whose valuable co-
ordination and guidelines helped me to complete this project as per required norms.

I whole heartedly thank my college librarian and computer laboratory staff whose fulsome support
cannot be circumscribed.

Lastly I would like to thank each and every individual who directly or indirectly has assisted me in
collecting the date and defining a proper structure for my project.
 DECLARATION

I Nilesh R. Chogale, student of PGDM (IB) declares that the work done on the project entitled
“INDIAN 4 WHEELER MARKET IN RELATION WITH TATA MOTORS” is original. Any
references used in this report have been duly acknowledged.

The study of the project is thereby the copyright of the author. This report shall not be published
without the prior permission of the author.

To the best of my knowledge and being the subject matter presented here is original and has not be
submitted to any other authority or university till date
 TABLE OF CONTENT

1. Executive summary
2. About the project
2.1 Introduction
2.2 Situation Analysis and defining the problem
2.3 Research Methodology
2.4 Objective of the project
2.5 Literature review
2.6 Scope and Need of the Project
2.7 Limitation of the project
3. Data Analysis and Interpretation
A) For objective 1
Industry Overview

Demand Characteristics:

Performance Of Major 4 Wheeler Player:

Foreign Direct Investment In Automobile Industry:
Anlysis Of 4 Wheler Market In India:
The Future of Indian Auto Industry:
Indian Car Market:

B) Objective 2 :

Analysis Of Tata Motors

Procurement Cycle For Tata Motors
Supply Chain Of Tata Motors
Production Statistics
Market Busting Moves By Tata Motors:
Challenges Faced By Tata Motors At The Time Of Expansion:
The Three Pillars Of Sustainability 2020
4. Conclusion And Findings:
5. Suggestion And Recommendation
6. Bibliography
INTRODUCTION:
INDUSTRY OVERVIEW:

The Automotive industry in India is one of the largest in the world and one of the fastest
growing globally. India manufactures over 11 million vehicles (including 2 wheeled and 4 wheeled)
and exports about 1.5 million every year .It is the world's second largest manufacturer of
motorcycles, with annual sales exceeding 8.5 million in 2009.India's passenger car and commercial
vehicle manufacturing industry is the seventh largest in the world with an annual production of more
than 2.6 million units in 2009. In 2009, India emerged as Asia’s fourth largest exporter of
passengers’ cars, behind Japan, South Korea, and Thailand

As of 2009, India is home to 40 million passenger vehicles and more than 2.6 million cars
were sold in India in 2009 (an increase of 26%), making the country the second fastest growing
automobile market in the world. According to the Society of Indian Automobile Manufacturers,
annual car sales are projected to increase up to 5 million vehicles by 2015 and more than 9 million by
2020 By 2050, the country is expected to top the world in car volumes with approximately 611
million vehicles on the nation’s road.

A chunk of India's car manufacturing industry is based in and around Chennai also known as
the "Detroit of India" with the India operations of, BMW, FORD, HYUNDAI and NISSAN
headquartered in the city. Chennai accounts for 60 per cent of the country's automotive
exports.Gurgaon and Manesar near New Delhi are hubs where all of the Maruti Suzuki cars in India
are manufactured. The Chakan corridor near Pune, Maharashtra is another vehicular production hub
with companies like General Motors, Volkswagon, Skoda, Mahindra & Mahindra, Tata Motors,
Mercedes Benz, Fiat and Force motors having assembly plants in the area. Ahmadabad with the Tata
Nano plant, Halol with General Motors in Gujarat, Aurangabad with Audi in Maharashtra and
Kolkata with Hindustan Motors in West Bengal are some of the other automotive manufacturing
regions around the country

The automotive industry in India is now working in terms of the dynamics of an open market.
Many joint ventures have been set up in India with foreign collaboration, both technical and financial
with global leading manufacturers.Also a very large numbers of joint ventures have been set up in the
auto components sectors and the pace is expected to pick up even further. The Government of India
is keen to provide a suitable economic and business environment conducive to the success of the
established and prospective foreign partnership ventures.$5.7 billion is the investment envisaged in
the new vehicles projects.

ABOUT TATA MOTORS

 Tata Motors today is India’s largest automobile company, being the market leader in
commercial vehicles and among the top three in passenger vehicles. Tata Motors is also the world’s
fourth largest truck manufacturer and the second largest bus manufacturer. Their operations are now
spread across the UK, South Korea, Thailand and Spain. Among them is Jaguar Land Rover, a
business comprising the two iconic British brands. It also have a strategic alliance with Fiat. Tata
vehicles are being marketed in several countries in Europe, Africa, the Middle East, South Asia,
South East Asia and South America.

The growth of Tata Motors is marked by customer focus and passion for engineering, and as
importantly a collaborative relationship with its vendors. Their belief is that together they can
achieve more, when each – the company and the vendor – focuses on its respective area of excellence
and bring to bear its unique competencies on product development. Working towards this goal, they
have adopted practices like early vendor involvement and mentoring, which have resulted in
effective deployment of resources by the vendor as also up gradation of their capabilities.

With the pace of product development quickening, the interface between the company and the
vendors will need to be even more seamless and speedy. This is as much a matter of adhering to the
practice as of using essential tools.

Following are the key drivers for TATA MOTORS success over the long period of time

 Procurement Group of Tata Motors

 Enrolling as a vendor
 Vendor development

The system which facilitate smooth transactions between Tata Motors and its current
vendors, and also ease the process of new vendors engaging with the company. They look forward to
a long-standing collaboration with suppliers/vendors.

FACT FILE:
 Founder Jamshedji Tata

Year Of Establishment 1945

Industry Automotive

The Tata Group

Business Group

Listings & Its Codes BSE - Code: 500570

NSE - Code: TELCO & TATAMOTORS
NYSE - Code: TTM

Corporate Office Bombay House

24, Homi Mody Street
Mumbai 400 001, India
Tel.: +(91)-(22)-56561676

Works Jamshedpur, Pune, Lucknow and Dharwad

E-Mail am@tatamotors.com
rbc@telco.co.in (for international inquiries)

Website www.tatamotors.com
www.tata/tatamotors.com

Different Operations of Tata Motors:

Manufacturing

Tata Motors had all along believed in developing strong in house design, engineering, and
manufacturing capabilities. Tata Motors performed a large part of its manufacturing activities in-
house. It had installed facilities to manufacture engines, gearboxes and transmission mechanisms,
body panels, castings and forgings and important components & sub-assemblies. It even
manufactured its own machine tools, dies and fixtures, in its machine tools division.

Product Development
 Tata Motors spends a lot of money around Rs.10 to Rs.12 Crores (US$7 to 8 million at
prevailing exchange rates) on R & D. It is there strong point. In a manufacturing industry research
and development is a series of mistakes by which you benefit. It gives there people excitement and
real knowledge. They regard t weir whole operation as one big training facility
Vendor Management

In 1997, Tata Motors promoted Tata Autocompsystems Limited (TACO) with the objective
of forming joint ventures with international auto component manufacturers and giving a special
thrust to vendor development.

Quality Management:

Tata Motors started a comprehensive quality improvement initiative in September 2000. The
initiative played an important role in the company's turnaround, from a loss of Rs.500 crores in the
year ended March 2001 to a profit of Rs.28 crores in the first quarter of 2002-03. Every year, about a
quarter of Tata Motors' workforce went through training courses, which were rated highly in the
Indian engineering industry.

Personnel were trained before building workshops. In case of imported machines, engineers
and workers were sent to the foreign manufacturer's facilities to receive training well before the
arrival of the machine

PROBLEM DEFINITION:
 Tata Motors is the biggest commercial vehicle producer and seller company in India
.Though it is facing some problems in fulfilling the supply of vehicles spare parts(auto component)
to the end user within the company’s predefined time of 72 hours.

RESEARCH METHODOLOGY:

 Data has been collected from primary and secondary sources:

a. Primary: Informal communication with senior people from an organization

: Through practical experience of working for an organization for some time

b. Secondary- website of the organization, Company records, and hand book.

 Information so collected has been put in to draw logical conclusion.

 All findings are presented unambiguously and all conclusions be justified by sufficient
evidence.

 Issues and problem have been found by personal discussion with seniors from an organization
and through practical experience of working in the organization.

 Finally report has been written.

OBJECTIVES:

 To Study and understand the 4 wheeler automotive market in India in close relation with Tata
Motors.

 To study the leading edge procurement cycle and supply chain of Tata Motors

1.6 Limitation of the project:

 Company secrecy was maintained by a company while giving the necessary inputs for my
project.

 Sometimes due to lack of time the respondent may not have given reliable information

 Time was also the constraint for gathering the information related to my project
LITERATURE REVIEW

 Tata motors Q3FY 2011 results-press release

 Tata motors magazines and web portal

SCOPE AND NEED OF THE STUDY:

The success of being the leader for Tata Motors in commercial vehicle segment with 74%
market share lies in the effective and updated procurement cycle of its spare parts (auto component) .
Also the smooth functioning of supplier-customer relationship adds to the accountability and
reliability during various operations. So the study of this effective procurement cycle for
commercial vehicle will help Tata Motors to make use of this existing cycle to improve the
performance in other segments like, passenger vehicle and utility vehicle.
DATA ANALYSIS AND INTERPRETATION
OJECTIVE 1
INDUSTRY OVERVIEW:

The 4 wheeler industry in India has not been able to match up to the performance of its
counterparts in other parts of the world. The main reason for this has been the regulatory atmosphere
that prevailed till the deregulation in the mid 1990s. After the Liberalisation the passenger car
segment saw a boom and many companies from India as well as foreign entered the market.

However, the smooth sailing was suddenly disrupted in the last quarter of FY1996. The
automobile industry, which contributed substantially to industrial growth in FY1996, failed to
maintain the same momentum between FY1997 and FY1999. The overall slowdown in the economy
and the resultant slowdown in industrial production, political uncertainty and inadequate
infrastructure development were some of the factors responsible for the slowdown experienced by
the automobile industry. In FY2000, the sector experienced a turnaround, posted positive growth
rates and witnessed the launch of many new models. But the spectacular growth in FY2000 was
followed by a decline in FY2001 and only a marginal growth of 0.5% in FY2002. However, since
FY2003, industry sales have increased at a 3-year CAGR of 17.4% to 1.14 million in FY2006.

The Indian automobile industry posted a spectacular growth of 32%, powered by improving
economic environment, gradual dissipation of job & business uncertainty, new offerings and good
consumer spending in urban and rural India. The upbeat market sentiment spanned all segments of
motor vehicles, with passenger vehicles, commercial vehicles, two-wheelers and three-wheelers - all
recording decent double-digit growth.

Passenger vehicles, continuing its good run, stole the limelight by notching up 35% rise in
domestic sales. While Maruti Suzuki remained the leader without much of a challenge and recorded
spectacular sales numbers, new players in the segment such as Ford Motor, General Motors and
Volkswagen too benefited from a robust demand for their recently launched small cars - Figo, Beat
and Polo.
 Riding on the continuing strong performance of industry and the increased pace of
infrastructure development, commercial vehicles sustained the momentum of the last six months
during May,2010, growing by a whopping 57.7% in domestic market. The smart growth numbers of
CVs were, to a great extent, aided by the low base of the previous year, though.

DEMAND CHARACTERISTICS:

(A) Passenger Cars:

In developed markets, engine capacity and wheel-base are the bases of segmentation of
passenger cars: price does play a role but only up to a point. Since affordability is the most important
demand driver in India, the domestic car market has until now been segmented on the basis of
vehicle price. Price-based competition takes place in a continuum rather than in segments since
nearly all the models are launched in multiple versions at different price points. As a result, a higher-
end variant may compete with a lower-end variant of a car in a segment above it.

(B) Multi Utility Vehicle (MUVs):

The MUV segment consists of vehicles that are suited to both rural and urban areas. In rural
areas where the roads are usually bad, these vehicles are used as goods carriers and also for public
transportation. Northern and Western India account for nearly two-thirds of the demand for MUV.
Specifically, in States like Rajasthan, Madhya Pradesh, Uttar Pradesh and Maharashtra, the demand
for MUVs is the largest. There are three segments of buyers for MUVs: the private market,
Government, and the Defence. Until the 1990s, the Government and Defence segments accounted for
the largest share of the market. The reduction in Government and defence spending since the 1990s
has substantially reduced sales to these two segments. This has pushed private sector purchases into
greater prominence.

There are three sub-segments of the UV / MUV segment: the hard-top, soft-top and pick-up.
The hard-top version consists of the higher-end Sports Utility Vehicles (SUVs) that have been
present in the Indian markets since FY1999. Following the success of the higher-end SUVs, the share
of the hard top segment in total MUV sales has registered an increase. Soft-top MUVs, which are
largely dependent on sales in the rural and semi-urban markets where the vehicles serve as modes of
mass transportation (maxi taxi); have witnessed a contraction in volumes in recent years. The
declining share of the soft-top sub-segment is attributable largely to the increasing acceptance of
SUVs as an alternative to soft-tops (and even higher end-cars). That apart, soft-top sale have also
been affected by a decline in rural income, increase in sales tax in some states, increase in diesel
prices, enforcement of strict emission control norms, and restraints on the issue of licenses to use
soft-top vehicles as rural taxis.

PERFORMANCE OF MAJOR 4 WHEELER PLAYER:

(A) Maruti Suzuki India Limited (MSIL):

Maruti Suzuki sells one car out of every two cars sold in the country, crossed yet another
landmark, clocking over one-lakh units of sales in a month for the first time. MSIL sold 102,175
units in May 2010, of which 12,134 units accounted for exports. Incidentally, the company's
domestic sales tally of 90,041 units was also the highest ever in a month. The previous highest
monthly domestic sale was 84,765 units in February 2010. Maruti Suzuki registered highest ever-
domestic sales in A2, A3 and C segments respectively. A2 segment (comprising of Alto, WagonR,
Estilo, Swift, Ritz, A-Star) grew by 16.6% to clock sales of 62,679 units. A3 segment (SX4, Dzire)
rose by 60.5% to 10,883 units, while domestic sales volume in C segment (Omni, Versa, Eeco) at
12,953 units soared by 70% during the month.

(B) Hyundai Motor India Ltd (HMIL):

Hyundai Motors stayed on course with its domestic sales at 27,151for May, 2010, units
growing by 15.5% over the same month last year. HMIL's total sales for May'10 (including exports)
stood at 46,808 units as against 43,624 units in May 2009, registering a 7.3% growth. The exports
declined by 2.3% from 20,121 units in May 2009 to 19,657 units in May 2010. The segment-wise
cumulative sales of HMIL during May 2010 were as follows: A2 segment (Santro, i10, Getz & i20) -
42,460 units; A3 segment (Accent & Verna)-4,310 units; A4 segment (Elantra) -1 unit; andA5
segment (Sonata Transform) - 37 units. The demand for the i20 continues to swell, as demand has
shot up by almost 35% following the launch of the new model and addition of two trims.
 (C) General
Motors India:

Chevrolet
Beat bolstered an
impressive
growth for
General Motors
India of 61%,
selling 8,225 units against 5,109 units in May last year. The May 2010 sales comprised of 2,812 units
of the Chevrolet Spark, 2,296 units of Chevrolet Beat, 1,418 units of the Chevrolet Tavera, 854 units
of the Cruze, 396 Units of Chevrolet Aveo, 312 units of Chevrolet Aveo U-VA, 84 units of the
Chevrolet Captiva and 53 units of Chevrolet Optra.

(D)Tata Motors:

Tata Motors domestic sales of commercial and passenger vehicles in May 2010 were 52,801
units, a 38% growth over 38,392 units sold in May 2009. Of this, commercial vehicles racked up
31,475 units - up 37% over 23,004 vehicles sold in May last year. While LCV sales at 13,755 units
grew by 26.6% y-o-y. Passenger Vehicles Business Unit of Tata Motors reported a total sale of
21,477 units in the domestic market during May 2010, which translates into a good 38.9% increase
compared to 15,459 units a year earlier. Domestic sales of Tata passenger cars at 21,326 units surged
by 39% y-o-y. Sales of the Tata Nano were 3,550 units. The Indica range sales at 8,468 units
witnessed a 15% slide, while the Indigo range logging 6,600 units grew by a robust 133%. The
Sumo/ Safari range accounted for sales of 2,708 units, higher by 6% over May 2009. Exports of Tata
Motors at 3,978 units in May 2010 registered a growth of 121% compared to 1,804 units in May
2009.

(E) Mahindra & Mahindra Ltd (M&M):

M&M clocked 13,476 units of its UV sales in domestic market during May 2010, growing by
a healthy 67.8% over 8,033 units in May 2009. CV and 3-wheeler sales of M&M in domestic market
were also on a high growth trajectory. While CV sales at 7,796 units were up 43.9%, 3-wheeler
domestic sales volume increased by 59.4% y-o-y to 4,309 units during the month.

FOREIGN DIRECT INVESTMENT IN AUTOMOBILE INDUSTRY:

FDI Inflows to Automobile Industry have been at an increasing rate as India has witnessed a
major economic liberalization over the years in terms of various industries. The automobile sector in
India is growing by 18 percent per year.

The automobile sector in the Indian industry is one of the high performing sectors of the
Indian economy. This has contributed largely in making India a prime destination for many
international players in the automobile industry who wish to set up their businesses in India. The
automobile industry in India is growing by 18 percent per year. The automobile sector in India was
opened up to foreign investments in the year 1991. 100% Foreign Direct Investment (FDI) is allowed
in the automobile industry in India. The production level of the automobile sector has increased from
2 million in 1991 to 9.7 million in 2006 after the participation of global players in the sector.

Advantages of FDI in the Automobile Sector in India:

The basic advantages provided by India in the automobile sector include, advanced
technology, cost-effectiveness, and efficient manpower. Besides, India has a well-developed and
competent Auto Ancillary Industry along with automobile testing and R&D centers. The automobile
sector in India ranks third in manufacturing three wheelers and second in manufacturing of two
wheelers.

Opportunities of FDI in the Automobile Sector in India:

Opportunities of FDI in the Automobile Sector in India exist in

• Establishing Engineering Centres.

• Two Wheeler Segment.

• Establishing Research and Development Centres.

 • Heavy truck Segment.

• Passenger Car Segment.

Important Aspects of FDI in Automobile Industry:

a) FDI up to 100 percent has been permitted under automatic route to this sector, which has led
to a turnover of USD 12 billion in the Indian auto industry and USD 3 billion in the auto parts
industry.

b) The manufacturing of automobiles and components are permitted 100 percent FDI under
automatic route.

c) The automobile industry in India does not belong to the licensed agreement.

d) Import of components is allowed without any restrictions and also encouraged.

ANLYSIS OF 4 WHELER MARKET IN INDIA:

1.5. PESTL ANALYSIS:

Political:
• In 2002, the Indian government formulated an auto policy that aimed at promoting
integrated, phased, enduring and self-sustained growth of the Indian automotive industry

• Allows automatic approval for foreign equity investment up to 100% in the automotive sector
and does not lay down any minimum investment criteria.

• Formulation of an appropriate auto fuel policy to ensure availability of adequate amount of

appropriate fuel to meet emission norms

• Confirms the government’s intention on harmonizing the regulatory standards with the rest of
the world

• Indian government auto policy aimed at promoting an integrated, phased and conductive
growth of the Indian automobile industry.

• Allowing automatic approval for foreign equity investment up to 100% with no minimum
investment criteria.

• Establish an international hub for manufacturing small, affordable passenger cars as well as
tractor and two wheelers.

• Ensure a balanced transition to open trade at minimal risk to the Indian economy and local
industry.
 • Assist development of vehicle propelled by alternate energy source.

• Lying emphasis on R&D activities carried out by companies in India by giving a weighted tax
deduction of up to 150% for in house research and R&D activities.

• Plan to have a terminal life policy for CVs along with incentives for replacement for such
vehicles.

• Promoting multi-model transportation and the implementation of mass rapid transport system.

Economic:
• The level of inflation Employment level per capita is right.

• Economic pressures on the industry are causing automobile companies to reorganize the
traditional sales process.

• Weighted tax deduction of up to 150% for in-house research and R & D activities.

• Govt. has granted concessions, such as reduced interest rates for export financing.

• The Indian economy has grown at 8.5% per annum.

• The manufacturing sector has grown at 8-10 % per annum in the last few years.

• More than 90% of the CV purchase is on credit.

• Finance availability to CV buyers has grown in scope during the last few years.

• The increased enforcement of overloading restrictions has also contributed to an increase in

the no. of CVs plying on Indian roads.

• Several Indian firms have partnered with global players. While some have formed joint
ventures with equity participation, other also has entered into technology tie-ups.

• Establishment of India as a manufacturing hub, for mini, compact cars, OEMs and for auto
components.

Social:
• Since changed lifestyle of people, leads to increased purchase of automobiles, so automobile
sector have a large customer base to serve.

• The average family size is 4, which makes it favorable to buy a four wheeler.

• Growth in urbanization, 4th largest economy by ppp index.

• Upward migration of household income levels.

 • 85% of cars are financed in India.

• Car priced below USD 12000 accounts for nearly 80% of the market.

• Vehicles priced between USD 7000-12000 form the largest segment in the passenger car
market.

• Indian customers are highly discerning, educated and well informed. They are price sensitive
and put a lot of emphasis on value for money.

• Preference for small and compact cars. They are socially acceptable even amongst the well
off.

• Preference for fuel efficient cars with low running costs.

Technological:
• More and more emphasis is being laid on R & D activities carried out by companies in India.

• Weighted tax deduction of up to 150% for in-house research and R & D activities.

• The Government of India is promoting National Automotive Testing and R&D Infrastructure
Project (NATRIP) to support the growth of the auto industry in India

• Technological solutions helps in integrating the supply chain, hence reduce losses and
increase profitability.

• Customized solutions (designer cars, etc) can be provided with the proliferation of technology

• Internet makes it easy to collect and analyse customer feedback

• With the entry of global companies into the Indian market, advanced technologies, both in
product and production process have developed.

• With the development or evolution of alternate fuels, hybrid cars have made entry into the
market.

• Few global companies have setup R &D centers in India.

• Major global players like audi, BMW, Hyundai etc have setup their manufacturing units in
India.

Environmental:
• Physical infrastructure such as roads and bridges affect the use of automobiles. If there is
good availability of roads or the roads are smooth then it will affect the use of automobiles.
 • Physical conditions like environmental situation affect the use of automobiles. If the
environment is pleasant then it will lead to more use of vehicles.

• Technological solutions helps in integrating the supply chain, hence reduce losses and
increase profitability.

• With the entry of global companies into the Indian market, advanced technologies, both in
product and production process have developed.

• With the development or evolution of alternate fuels, hybrid cars have made entry into the
market.

• Few global companies have setup R &D centers in India.

• Major global players like Audi, BMW, and Hyundai etc have setup their manufacturing units
in India.

Legal:

• Legal provision relating to environmental population by automobiles.

• Legal provisions relating to safety measures.

• Confirms the government’s intention on harmonizing the regulatory standards with the rest of
the world

• Indian government auto policy aimed at promoting an integrated, phased and conductive
growth of the Indian automobile industry.

• Establish an international hub for manufacturing small, affordable passenger cars as well as
tractor and two wheelers.

• Ensure a balanced transition to open trade at minimal risk to the Indian economy and local
industry.
PORTER’S FIVE FORCES MODEL:

Porter’s Five Forces of Competition framework views the profitability of an industry as

determined by five sources of competitive pressure. These five forces of competition include three
sources of “horizontal” competition: competition from substitutes, competition from entrants, and
competition from established rivals; and two sources of “vertical” competition: the bargaining power
of suppliers and buyers. The strength of each of these competitive forces is determined by a number
of key structural variables, as shown in Figure 3.3.

FIGURE
Porter’s Five Forces of Competition framework

Competition from Substitutes:

The price customers are willing to pay for a product depends, in part, on the availability of
substitute products. The absence of close substitutes for a product, as in the case of automobiles,
means that consumers are comparatively insensitive to price (i.e., demand is inelastic with respect to
price). The existence of close substitutes means that customers will switch to substitutes in response
to price increases for the product (i.e., demand is elastic with respect to price).

The extent to which substitutes limit prices and profits depends on the propensity of buyers to
substitute between alternatives. This, in turn, is dependent on their price performance characteristics.
The more complex the needs being fulfilled by the product and the more difficult it is to discern
performance differences, the lower the extent of substitution by customers on the basis of price
differences.
 FIGURE The structural determinants of the Five Forces of Competition

Rivalry between Established Competitors:

For most industries, the major determinant of the overall state of competition and the general
level of profitability is competition among the firms within the industry. In some industries, firms
compete aggressively – sometimes to the extent that prices are pushed below the level of costs and
industry-wide losses are incurred. In others, price competition is muted and rivalry focuses on
advertising, innovation, and other non price dimensions. Six factors play an important role in
determining the nature and intensity of competition between established firms: concentration, the
diversity of competitors, product differentiation, excess capacity, exit barriers, and cost conditions.

Threat of Entry:

If an industry earns a return on capital in excess of its cost of capital, that industry acts as a
magnet to firms outside the industry. Unless the entry of new firms is barred, the rate of profit will
fall toward its competitive level. The threat of entry rather than actual entry may be sufficient to
ensure that established firms constrain their prices to the competitive level.
 Economies of Scale – Since Indian automobile market is of order $ 350 billion; the
economies of scale are very high. Thus, threat of new entrants is low.

 Product Differences – Since there is hardly any difference in the offerings of the various
providers, so product differentiation is low. So threat of new entrants is high.

 Brand Identity – Since there is no big Retailer like Amazon.com or Wal-Mart in India. So
threat of new entrants is high.
  Government Policy – Since the Government Policy has been quite restrictive till now with
respect to the Retail market & FDI, so threat of new entrants is low.

 Capital Requirements – The capital requirements for entering in the automobile sector are
substantially high (high fixed cost and cost of infrastructure), so only big names can think of
venturing into this area so, in that respect threat of new entrants is low.

 Access to distribution – Since in India there is no well established distribution network. So

threat of new entrants is low.

Bargaining Power of Buyers:

The firms in an industry operate in two types of markets: in the markets for inputs and the
markets for outputs. In input markets firms purchase raw materials, components, and financial and
labour services. In the markets for outputs firms sell their goods and services to customers (who may
be distributors, consumers, or other manufacturers). In both markets the transactions create value for
both buyers and sellers. How this value is shared between them in terms of profitability depends on
their relative economic power. The strength of buying power that firms face from their customers
depends on two sets of factors: buyers’ price sensitivity and relative bargaining power.
 Product Differences – Since there is hardly any difference in the offerings of the various
providers, so product differentiation is low. So bargaining power of buyers is high.
 Buyer Information – Today’s customers are well educated about the various product
offerings in the sector. So bargaining power of buyers is high.
 Buyer Switching Costs – Since customers don’t have to pay a fat premium to be registered
for provision of services, so bargaining power of buyers is high.
 Brand Identity – High Brand Identity and trustworthiness reduce the bargaining power of
buyers but, otherwise the bargaining power of buyers is high.
 Buyer Profits – Since dealers offers discounts and various bundling services like 0%
insurance, old car sale, etc, on different items. Hence bargaining power of buyers is high.

Bargaining Power of Suppliers:

Analysis of the determinants of relative power between the producers in an industry and their
suppliers is precisely analogous to analysis of the relationship between producers and their buyers.
The only difference is that it is now the firms in the industry that are the buyers and the producers of
inputs that are the suppliers. The key issues are the ease with which the firms in the industry can
switch between different input suppliers and the relative bargaining power of each party.
  Product Differences – Since there is hardly any difference in the offerings of the various
suppliers, so product differentiation is low. So bargaining power of Suppliers is low.

 Supplier Information – Today’s automobile manufacturers are well educated about different
Suppliers. So bargaining power of Suppliers is low.

 Supplier Switching Costs – Since different Suppliers hold resources as per buyer’s
requirements and a large inventory has to be maintained. So bargaining power of Suppliers is
low as they would have to incur a huge cost on switching. But if they get automobile
manufacturers for similar products who can pay higher Supplier switching cost is low. In such
case, bargaining power of Suppliers is high.

 Brand Identity – High Brand Identity and Trustworthiness of a Supplier increases the
bargaining power of Suppliers. But, otherwise the bargaining power of suppliers is low.

SWOT ANALYSIS:

I. Strengths:

 Large domestic market.

 Sustainable labor cost advantage.

 Government incentives for manufacturing plants.

 Strong engineering skills in design.

 Able to achieve significant gains in productivity.

 II. Weaknesses:

 Low labor productivity.

 High interest costs and high overheads.

 Rising cost of production.

 Low investment in Research and Development.

III. Opportunities:

 Commercial vehicles.

 Heavy thrust on mining and construction activity.

 Increase in the income level.

 Cut in excise duties.

 Rising rural demand.

IV. Threats:

 Rising interest rates.

 Cut throat competition.

 Lack of technology for Indian Companies.

FACTORS CONTRIBUTING TO THE GROWTH OF INDIAN 4 WHEELER MARKET:

The convergence of government policies, economy’s growth, and people’s purchasing power
has all contributed to the phenomenal growth of Indian Auto industry. Some of the important growth
drivers are explained below:

• Rise in the industrial and agricultural output indirectly helps Indian Auto industry - Industrial
and agricultural output increase has reflected in higher GDP and overall growth of the
economy which is about 9% in the last three years. Higher GDP means more purchasing
 power. Sales of vehicles for domestic and commercial consumption have seen high growth in
these three years too.

• Growth in the road infrastructure increases demand for vehicles. Indian highways and roads
have improved a lot in quality and connectivity in the last 20 years. Projects like the Golden
Quadrilateral aim to make even remote areas accessible by road. Some of the National
Highways are of international standards. This has made road transport a viable, cost effective
and speedy option both for goods and passenger traffic.

• Rise in the Per capita income increases two/four wheeler sales. Industrial growth in the 70s,
IT boom in the 1980s and BPO boom in the 1990s have transformed the Indian middle class.
The present generation is able to earn the same levels of salary that their parents were earning
after years of work. This has pushed up the demand for two and four wheelers. A rise in per
capita income is also indirectly responsible for the retail boom and industrial boom for
consumer durables. This has pushed up the demand for commercial vehicles to enable
efficient distribution.

• Urbanization changes the face of Indian auto industry. Joint families in towns and villages
have given away to migration of the younger generation to cities in search of better
opportunities. The new-age educated migrants and nuclear families (many with double
income couples) have a higher purchasing power. Presently, the rate of spread of urbanization
is 30% which is likely to increase by 40% in 2030 (UN). Urbanization has promoted
infrastructural development and it is estimated to spread at a rate of $500 billion in the next 5-
6 years.

• Rising working class and middle class contribute to increased demand of automotives. Post
1980s, a surging economy has created millions of new jobs in the private sector. This has lead
to a lot of prosperity in the working class and the middle income households. They are able to
provide for food, clothing and education and also are able to think of owning luxuries like
vehicles. According to the Planning Commission report, between the year 2003 and 2009,
130 million people would have been added to the working population. According to a finding
from McKinsey, the middle income group will grow from 50 million to 550 million by 2025.

• Exhaustive range of options in price and models of automotives. Indian consumer in 70s and
80s had to choose between and Premier Padmini or an Ambassador. Now there are at least
123 different models of cars from 30 odd manufacturers available. The prices of the compact
cars like Tata’s Nano have made the world sit up and take note of the truly unbeatable price
points.
 • Attractive Finance Schemes for purchase of automotives. Most nationalized and foreign
banks have very tempting finance options and low interest rates for purchase of cars and two
wheelers. There are specialized companies that finance the commercial vehicles. All this has
made the dream of owning a vehicle an easy reality.

• Favorable Government Policies for the auto sector. Apart from a healthy growing economy,
Indian auto industry has a lot to thank the government for the amazing growth rates. The
Indian government has introduced several industry specific programs.

Government support:

Current Industrial Policy:

The New Industrial Policy of 1991 delicensed the Automobile Industry in India, but
passenger car was delicensed in 1993. Now, no license is required for setting up of any unit for
manufacture of Automobiles except in some special cases. Further, 100 per cent Foreign Direct
Investment (FDI) is permissible under automatic route in this sector including passenger car segment.
The import of technology or technological upgradation on the royalty payment of 5 per cent without
any duration limit and lump sum payment of US $ 2 million is also allowed under automatics route in
this sector. This liberalization has helped this sector to restructure itself, absorb newer technologies,
and keep pace with the global developments realizing its full potential.

Exim Policy:

Removal of Quantitative Restrictions (QRs) from April 1, 2001 has allowed the import of
vehicle,including passenger car segment freely subject to certain conditions notified by DGFT. To
protect India from becoming a dumping ground for old and used vehicles produced abroad, the
custom duty on the import of second hand vehicles including passenger cars has been raised to 105
per cent. The custom duty rate on new Completely Built Units (CBUs) has also been increased to a
level of 60 per cent to allow Indian countries to a fully competitive environment.

Recent policy initiatives:

In order to develop and realize the growth potential of this sector both at domestic and global
level, and to optimize its contribution to the national economy, the Department of Heavy Industry
has decided to draw up a 10 year Mission Plan for the development of Indian Automotive Sector
and creation of global hub.
 To put Indian Auto Industry at the global map, National Automotive Testing and R&D
Infrastructure Project (NATRIP) at the total cost of Rs. 1718 crore has been initiated.

 create critically needed automotive testing infrastructure to enable the government in ushering
in global vehicular safety, emission and performance standard, _ deepen manufacturing in India,
promote larger value addition and performance standards and facilitates convergence of India's
strength and IT and electronics with automotive engineering.

 enhance India's abysmally low global outreach in this sector by debottlenecking exports, and

 provide basic product testing, validation and development infrastructure so that Indian
automotive sector would not face any export obstacle in the foreign market

• In the Union Budget 2007-08, import duty on raw material had been reduced to 5-7.5 per cent
from the earlier 10 per cent.

THE FUTURE OF INDIAN AUTO INDUSTRY:

According to a report from United Nations Industrial Development Organization’s (UNIDO)

in ‘International Yearbook of Industrial Statistics 2008’, India enjoys 12th position amongst top 15
automakers in the world. India is at the 4th position amongst the auto makers of developing
countries. By 2016 the size of the Indian automobile industry is expected to grow by 13%, to reach a
mark of US$ 120-159 billion. Presently, India is the 2nd largest two wheeler market in the world and
fourth largest commercial vehicle market worldwide. With allies in a strong economy, rising demand
and financial backing, Indian auto industry is standing at the threshold of success.

The four wheeler segment comprises of the passenger vehicles, utility vehicles and multi-
purpose vehicles. India is the 11th largest passenger car market in the world and prominently features
on the major automobile players’ road map. The passenger cars segment is has the largest share in
the domestic passenger vehicles industry. It contributes to a total volume of 78% and the rest of the
share is enjoyed by utility and sports vehicles. Some of the key players in the market are Maruti
Udyog Ltd. Tata Motors Ltd., Hyundai, Toyota, Honda, Ford and GM. The newer entrants are the
marquee brands like Mercedes-Benz, BMW and Volkswagen.

OBJECTIVE 2 :

WHY TO SELECT TATA MOTORS AS APART OF STYDY:

A Tata motor is the leading brand name in Indian 4 wheeler market segment. It is the trusted
name among all the vehicle users. Tata motors a wide range of vehicles for all different kinds of user.
It also has dealers network spreaded around the world. If you consider the network in India it is the
best of all present competitors .Due to the availability of spare parts at the nearest location to that of
the customer within short span of time is only possible due to the effective procurement cycle and its
useful Supply Chain Management of Tata Motors. So to study and understand the leading
procurement cycle in 4 wheeler market segement ,Tata Motors is the ultimate choice for the project.

SWOT Analysis - Tata Motors Limited

The company began in 1945 and has produced more than 4 million vehicles. Tata Motors
Limited is the largest car producer in India. It manufactures commercial and passenger vehicles, and
employs in excess of 23,000 people.

Strengths

• The internationalization strategy so far has been to keep local managers in new acquisitions,
and to only transplant a couple of senior managers from India into the new market. The
benefit is that Tata has been able to exchange expertise. For example after the Daewoo
acquisition the Indian company leaned work discipline and how to get the final product 'right
first time.'
• The company has a strategy in place for the next stage of its expansion. Not only is it
focusing upon new products and acquisitions, but it also has a programme of intensive
management development in place in order to establish its leaders for tomorrow.
• The company has had a successful alliance with Italian mass producer Fiat since 2006. This
has enhanced the product portfolio for Tata and Fiat in terms of production and knowledge
exchange. For example, the Fiat Palio Style was launched by Tata in 2007, and the companies
have an agreement to build a pick-up targeted at Central and South America.

Weaknesses

• The company's passenger car products are based upon 3rd and 4th generation platforms,
which put Tata Motors Limited at a disadvantage with competing car manufacturers.
• Despite buying the Jaguar and Land Rover brands (see opportunities below); Tat has not got a
foothold in the luxury car segment in its domestic, Indian market. Is the brand associated with
commercial vehicles and low-cost passenger cars to the extent that it has isolated itself from
lucrative segments in a more aspiring India?
• One weakness which is often not recognised is that in English the word 'tat' means rubbish.
Would the brand sensitive British consumer ever buy into such a brand? Maybe not, but they
would buy into Fiat, Jaguar and Land Rover (see opportunities and strengths).

Opportunities
 • In the summer of 2008 Tata Motor's announced that it had successfully purchased the Land
Rover and Jaguar brands from Ford Motors for UK £2.3 million. Two of the World's luxury
car brand have been added to its portfolio of brands, and will undoubtedly off the company
the chance to market vehicles in the luxury segments.
• Tata Motors Limited acquired Daewoo Motor's Commercial vehicle business in 2004 for
around USD $16 million.
• Nano is the cheapest car in the World - retailing at little more than a motorbike. Whilst the
World is getting ready for greener alternatives to gas-guzzlers, is the Nano the answer in
terms of concept or brand? Incidentally, the new Land Rover and Jaguar models will cost up
to 85 times more than a standard Nano!
• The new global track platform is about to be launched from its Korean (previously Daewoo)
plant. Again, at a time when the World is looking for environmentally friendly transport
alternatives, is now the right time to move into this segment? The answer to this question (and
the one above) is that new and emerging industrial nations such as India, South Korea and
China will have a thirst for low-cost passenger and commercial vehicles. These are the
opportunities. However the company has put in place a very proactive Corporate Social
Responsibility (CSR) committee to address potential strategies that will make is operations
more sustainable.
• The range of Super Milo fuel efficient buses are powered by super-efficient, eco-friendly
engines. The bus has optional organic clutch with booster assist and better air intakes that will
reduce fuel consumption by up to 10%.

Threats

• Other competing car manufacturers have been in the passenger car business for 40, 50 or
more years. Therefore Tata Motors Limited has to catch up in terms of quality and lean
production.
• Sustainability and environmentalism could mean extra costs for this low-cost producer. This
could impact its underpinning competitive advantage. Obviously, as Tata globalises and buys
into other brands this problem could be alleviated.
• Since the company has focused upon the commercial and small vehicle segments, it has left
itself open to competition from overseas companies for the emerging Indian luxury segments.
For example ICICI bank and DaimlerChrysler have invested in a new Pune-based plant which
will build 5000 new Mercedes-Benz per annum. Other players developing luxury cars
targeted at the Indian market include Ford, Honda and Toyota. In fact the entire Indian market
has become a target for other global competitors including Maruti Udyog, General Motors,
Ford and others.
 • Rising prices in the global economy could pose a threat to Tata Motors Limited on a couple
of fronts. The price of steel and aluminium is increasing putting pressure on the costs of
production. Many of Tata's products run on Diesel fuel which is becoming expensive globally
and within its traditional home market.

INDIAN CAR MARKET:

 The key market players are : Maruti Udyog Ltd.,Hyundai Motor India Ltd.,Tata Motors Ltd
., Mahindra & Mahindra and Toyota

 Domestic Market share of passenger cars for 2009-10 :

Source - SIAM
Diagram represents Tata Motors CV exports growth ( figures represent volumes sold)

SOURCE – Tata motors Q3FY2011 results published on 11th feb 2011

Reason behind the growth was:

a. Global economic conditions continues growth in key exports markets

b. strong growth in the commercial vehicle was driven by increase in sales in its prime markets of
SAARC and South African countries

186407
200000
145246
150000
138031
53790 66947
100000 101145

39730 46675
50000

0 LCV

Q3FY10 MHCV
Q3FY11
9mFY10
9mFY11

MHCV LCV

SOURCE – Tata motors Q3FY2011 results published on 11th feb 2011

Diagram represents the volumes sold in domestic markets for Tata Motors CV segement
The Tata Motors sales grew 21.5 % in current qurter over corresponding period
 MHCV grew at ~17% while LCV segement grew at ~24%

Analysis:

 The emission norms changed with effect from Oct 1,2010 .Demand continues to be strond
with the new emission norms.
 Growth in the bus segement is lower as large volumes were taken up in the JNNURM scheme
in previous quarter
 Supply constraints emanating from emission norm changes in the early part of the quarter
dampend volumes mainly in MHCVs
 ACE family drives volume growth.expected to continue to add volumes as a result of shifting
Nano to Sanand.

COMPARISION OF GLOBAL SALES OF TATA MOTORS ACROSS THE GLOBE FOR

TWO CONSECUTIVE PERIODS
Tata Motors having global presence through various acquisition and joint venture. Following are
some of the companies which are a part of Tata Motors.

COMPANY COUNTRY OWNERSHIP MARKETS

HISPANO Subsidiary Europe
JAGUAR Subsidiary Global
LAND ROVER Subsidiary Global
TATA MOTORS Division India ,South Africa
TATA DAEWOO Subsidiary South Korea

SUBSIDIARIES, JV’S AND ASSOCIATES BY TATA MOTORS:

 Subsidiaries, JVs and Associates Websites

Tata Daewoo Commercial Vehicle Company

www.tata-daewoo.com
Ltd (TDCV)

Tata Marcopolo Motors Ltd (TMML)

Tata Hispano Motors Carrocera S. A. www.tatahispano.com

Tata Motors (Thailand) Limited (TMTL) www.tatamotors.co.th

Tata Motors(SA) Proprietary Ltd (TMSA)

HV Axles Limited (HVAL) www.hvaxles.com

HV Transmissions Limited (HVTL) www.hvtransmissions.com

Telco Construction Equipment Co. Ltd.

www.telcon.co.in
(Telcon)

TAL Manufacturing Solutions Ltd. (TAL) www.tal.co.in

Tata Motors European Technical Centre plc.

(TMETC)

Tata Technologies Ltd. (TTL) and its

www.tatatechnologies.com
subsidiaries

TML Distribution Company Limited (TDCL)

Concorde Motors (India) Ltd. (Concorde)

Tata Motors Finance Limited www.tmf.co.in

Tata Motors Insurance Broking & Advisory

Services Ltd (TMIBASL)

TML Holdings Pte. Ltd. (TML)

Sheba Properties Ltd. (Sheba)

PROCUREMENT CYCLE FOR TATA MOTORS

TATA MOTORS Procurement Process
 Sourcing is very important and critical function for Tata Motors. Different agencies
participate during the entire product life cycle. It starts as early as early vendor introduction when
the product is in concept stage. Strategically important sources with a potential of developing
relationship into strategic alliances are finalised during this step. Quantum of outsourcing work and
nature of technology to be developed decides the corresponding development agency. After which
specific nodal agency is responsible for development of parts and aggregates till the product is
brought to the level of regular procurement. Further, on the nature parts/aggregate, either central
materials agency or the sourcing group attached to the respective factory (where the part will be
consumed) will initiate the process for regular procurement.

Certain steps are followed by Tata Motors to make use of effective procurement cycle. The
steps are as follows

1) Customer order:

Customer are the end user who has a vehicle ,be it commercial vehicle like
trucks,tempo,minitruck etc or passenger vehicle such as bus, car etc.Sometimes the customer can be
dealer or retailer who borrows spare parts for different vehicle from Tata Motors and sells it to end
user. the requirements for apparel parts can arise due to two reason:

a. In case of an accidents of a vehicle and

b .If a customer wants to replace existing parts(auto components) with the new one

In both the above cases customer can place an order to the nearby Tata dealer and retailer or
can place it directly to the procurement team of an organization.

Tata has the large dealership networks in an automobile industry in spreadfed al over the
world. Also it has the biggest network in India.

After receiving the order from the customer, dealer checks for the availability of the parts and
sells it to customer. If the part (auto component) is not available with the dealer, he place the same
order to the procurement division of nearby zone (Mumbai, Delhi, Chennai etc.).Tata motors have
strategically placed procurement division all over India. so as to reach to the customer within shortest
possible time .

If the zonal procurement division is unable to provide spare part within 1 week, the order then
moves to the central procurement department i.e( TML procurement division ,Mumbai)

2. Working of a central procurement department

 Once the purchase order comes to the department, an officer check it for the type of
requirement such as normal requirement or it is a VOR (vehicle off road) requirement. If the part is a
VOR part, it is in urgent need and therefore it has to be treated as top priority parts and has to make
available very quickly within 72 hours.

Once the type of requirement is recognize, procurement people then check for availability of
the part at different warehouses within India through the e sourcing application programme such as
SAP. If the part is availability is shown in the system, the system movement is generated and
therefore part is released from that particular warehouse and brings it to the customer or to the dealer.

System Check:

Tata Motors has manufacturing plants situated at Jamshedpur in the East,Pune and Sanand in
the West and Lucknow and Pantnagar in the North. Whereas warehouses are strategically placed at
Palwal(North),Jamshedpur(East),Chakan(west) and Bangalore(South). The procurement people then
check the availability at the nearest warehouse and bring it to the customer. The above mentioned
four central warehouses has been allocated with the unique code and every part movement is
generated with this unique code. The selection of the nearest warehouse location is depend on
following factors:

a.Requirement of the part:

if the part is needed on very urgent basis such as in case of VOR parts ,it is made available
from the nearest location,If the part is needed after some time then an alternate location can be
selected.

B.Logistic cost:

Tata Motors avail the logistic services from BLUEDART.Bluedart vehicles are already
placed at each and every warehouse. The logistic cost associated with every part is quite high and
therefore is is preferable to select the nearest warehouse location as the desired one to avail the part.
Marginal reduction in logistic cost can considerably reduce the overall cast of the auto component.

C.Distance and Time:

Distance is also the constraint for making part available on time .Larger the distance, larger
the cost to carry the part and therefore need more time reaches to the customer.

After the effective selection of warehouse location, procurement officer generate the purchase
order and made available the part. If the part is not available then the procurement executive check
the part availability at the respective manufacturing plant located at different location such as
Jamshedpur in the East,Pune and Sanand in the West and Lucknow and Pantnagar in the North. If the
sufficient no of parts is available then it is moved to the warehouse or can directly move to the
customer through Bluedart service as an logistic player.

For making the part available procurement people generate the P.O.(purchase order) through
the SAP system against the warehouse/plant code and check the movement regularly until the part
reach to the desired customer/dealer. Still if the part is not available in plant ,then it generate the P.O
against suppliers and ask the supplier to make that part according to the specification provided by
Tata Motors design Team.

3. Working of Suppliers:

Tata Motors works in close relation with their supplier in product development stage and
therefore supplier is an integral part of any organizations success. Tata Motors has a wide base of its
suppliers spreaded all across India as follows

a) North region : 220 plus suppliers

b) East region : 130 plus suppliers
c) West region : 440 plus suppliers
d) South region : 80 plus suppliers

The Purchase Order such as Production Purchase Order, specifies relevant details of the
items such as Part No, Description, Price describe the goods and services being purchased, specify
the name and address of the Tata Motors Ordering Plant and the Supplier along with other terms and
conditions. The Purchase Order and the Delivery Schedules are issued from time to time are the basis
of supply of goods/services to Tata Motors.

Tata Motors expect suppliers to work in the spirit of partnership and support cross functional
working in the areas of Product Development, Cost Reduction and Quality Improvement.

The supplier is required to demonstrate continuous improvements in all areas of cost

reduction, quality improvements and delivery performance. Supplier is also expected to foster spirit
of innovation and continuously upgrade the products and services offered to Tata Motors to meet the
common aim of customer satisfaction and show commitment towards this by actually practicing tools
such as Kaizen, Six Sigma etc. to achieve Business Excellence.

All suppliers of Tata Motors are expected to achieve QS 9000 / TS 16949 certification – an
internationally accepted and widely practiced Quality system in the manufacturing industries.

Tata Motors evaluates suppliers’ performance against targets and provides such objective
regular feedback to suppliers related to achievements against targets on various areas of cost, quality
and delivery. Continuation, expansion and diversification of business relationship with Tata Motors
depend on the supplier’s ability to meet/surpass these targets.

Tata Motors purchase Products from supplier, subject to supplier meeting system
specifications, quality, reliability, performance, delivery, price requirements etc of Tata Motors as
detailed in various sections in this General Terms and Conditions

The items agreed to be sold and supplied by the supplier must be delivered at designated
points within Tata Motors premises at various locations or any other location specified for Spare
parts. The property and risk of the items shall pass on to Tata Motors only when the said items are
delivered to Tata Motors at designated points and the supplier shall be responsible for any shortfall in
quantity / damage /loss to the said item till the same is delivered in good condition to Tata Motors
and thus acknowledged by Tata Motors.

Supplier shall normally establish its manufacturing facilities near assembly location of Tata Motors
with an objective of JIT supplies to Tata Motors. In the event Supplier’s manufacturing location is
not in the vicinity of Tata Motors’ ordering plant, supplier shall establish storage facility near the
ordering plant of Tata Motors to provide uninterrupted and streamlined supply of materials.

FOLLOWING DIAGRAM REPRESENT THE INFORMATION FLOW FOE PROCURING A PART (AUTO COMPONENT) AMONG

VARIOUS CONTRIBUTORS

CUSTOMER
PURCHASE ORDER
(P.O)
DEALER

AVAILABI
CUSTOMER
LITY
CHECK
CENTRAL

PROCUREMENT
SYSTEM MANUFACTURI
TEAMIN
CHECK NG PLANT
PLANT CUSTOME
OR TATA R
WAREHO WAREHOUSE
PARTUSE
CHECK GENERAT CUSTOME
WITH E P.O R
SUPPLIER
PARTSUPPLIER
DESCRIPTION
AND SPECIFICATION TO
SUPPLIER
PART MAKING TATA CUSTOM
BY SUPPLIER WAREHOUS ER

Supply Chain of TATA MOTORS

The orders of the Tata Motors arise from the bottom of the supply chain i. e., from the
consumers and goes through the manufacturing plant and climbs up until the third tier suppliers.
However the products, as channelled in every traditional automotive industry, flow from the top of
the supply chain to reach the consumers. Automakers in India are the key to the supply chain and are
responsible for the products and innovation in the industry.

The description and the role of each of the contributors to the supply chain are discussed below.

Third Tier Suppliers: These companies provide basic products like rubber, glass, steel, plastic and
aluminum to the second tier suppliers.

Second Tier Suppliers: These companies design vehicle systems or bodies for First Tier Suppliers .
They work on designs provided by the first tier suppliers or as per specifications provided by the Tata
itself. They also provide engineering resources for detailed designs. Some of their services may
include welding, fabrication, shearing, bending etc.

First Tier Suppliers: These companies provide major systems directly to assembly unit of Tata
Motors. The companies have global coverage, in order to follow their customers to various locations
around the world. They design and innovate in order to provide “black-box” solutions for the
requirements of their customers. Black-box solutions are solutions created by suppliers using their
own technology to meet the performance and interface requirements set by assembly unit.

First tier suppliers are responsible not only for the assembly of parts into complete units like
dashboard, breaks-axel-suspension, seats, or cockpit but also for the management of second-tier
suppliers.

After researching consumers’ wants and needs, design department begin designing models
which are tailored to consumers’ demands. The design process normally takes five years. The
companies have manufacturing units where engines are manufactured and parts supplied by first tier
suppliers and second tier suppliers are assembled.

Dealers: Once the vehicles are ready they are shipped to the regional branch and from there, to the
authorised dealers of the companies. The dealers then sell the vehicles to the end customers.

Parts and Accessory: These companies provide products like tires, windshields, and air bags etc. to
automakers and dealers or directly to customers.

Service Providers: Some of the services to the customers include servicing of vehicles, repairing
parts, or financing of vehicles. Many dealers provide these services but, customers can also choose to
go to independent service providers.

PRODUCTION STATISTICS

The production of automobiles has greatly increased in the last decade. It passed the 1 million mark
during 2003-2004 and has more than doubled since till 2009-2010

Car % % Total Vehicles %

Year Commercial
Production Change Change Prodn. Change
2009 2,166,238 17.34 466,456 -4.08 2,632,694 11.4
2008 1,846,051 7.74 486,277 -9.99 2,332,328 3.35
2007 1,713,479 16.33 540,250 -1.2 2,253,999 10.39
2006 1,473,000 16.53 546,808 50.74 2,019,808 19.36
2005 1,264,000 7.27 362, 755 9 1,628,755 7.22
 2004 1,178,354 29.78 332,803 31.25 1,511,157 23.13
2003 907,968 28.98 253,555 32.86 1,161,523 22.96
2002 703,948 7.55 190,848 19.24 894796 8.96
2001 654,557 26.37 160,054 -43.52 814611 1.62
2000 517,957 -2.85 283,403 -0.58 801360 -2.1
1999 533,149 285,044 818193
CURRENT FACTS

COMPANY LEADING SEGEMENT ( Market Share)

HERO HONDA 50% Motorcycle

HONDA 46% In Scooter

TVS 82 % In Mopeds

BAJAJ 68% Three Wheeler

Maruti Suzuki 52% In Passenger Cars

MAHINDRA 42 % In Utility Vehicle

TATA MOTORS 60% In Commercial Vehicle

TATA MOTO

Category FEB-11
M& HCV 18248
LCV 26837
UTILITY 4791
CARS 31559
TOTAL 81435
Market Busting Moves by Tata Motors :

As India’s largest automobile manufacturer, Tata Motors entered the market and
Maintains its position using the following Market Busting Moves:

a. Cost cutting innovative technique

B.Improving customers’ quality
c. Maintaining customer relation.
a) Cost cutting:
To cut costs, Tata Motors tried innovative technique such as zero-based costing. The
company’s engineers re-worked the cost of component all over again. For example, earlier, tata
Motors paid for its forged components on a cost-plus basis as claimed by a vendor. Under the new
system, it paid a price depending on the weight of the forging, leading to saving of 25%

B. improving customer’s quality

Apart from providing its customers with high performance automobiles, Tata Motors
Strongly believes in customer safety. Several cases have been cited where passengers driving
Tata vehicles have been saved after terrible accidents. Tata Motors established a crash-testing
Facility, the only one of its kind in the country, in Pune in 1996. The small workforce of 21
members including engineers aims to control the serious risks and intrusions in accidents. The
company believes that this factor has been vital to the success of the Indica and other products’
under the company’s passenger car unit. There are two complimentary aspects of crash testing:
simulation, through powerful computers and sophisticated software, and the physical crashing of
vehicles, at the prototyping stage.

The idea is to use every part of the vehicle in some way to save the occupant rather than
the vehicle". After using advanced software and finite element analysis to sketch various
scenarios and possible outcomes, a physical test is performed. The car is run at high-speeds into
barriers of steel and concrete monitored by high-speed cameras taking about 1000 frames per
second. Two crash-test dummies seated inside (Rs. 90lakh each) are wired to about 50 sensors
with an additional 30 sensors in the car to record and monitor every element of the crash.9
Through years of experience, reported cases and the vast amount of resources expended by
Tata Motors, they make sure that their customers are safe when driving their vehicles.

c. maintaining customer relations.:

The recent rains this month in Mumbai had caused heavy damage throughout the
region. The heavy rains turned into floods taking away people’s homes, cars and led to the loss of
other public and private property. The frustrated customers have been helped by a bold move by
the management of Tata Motors in wake of the rain damage. Tata has instructed all its dealers
and service centers to offer a 25% discount on spare parts, labor charges, oil changes, rust
treatment and up to 50% for Tata-branded audio and car security systems.11 The company has
also asked centers to swiftly mobilize parts, provide prompt service and keep stores open for
extended hours. Their comprehensive repair and relief support for owners of Tata vehicles has
helped them further strengthen their customer relations and show that they care.

 Market penetration strategy

 Attract competitor’s customer:
 Launch “India’s first” campaign against competitors.
 Highlight “value for money”.
 Good and wide spread service network.

 Convert non user into user:

 Special schemes for youth and middle income group like zero down payments,
low interest rate or a lower EMI.
 Market development

Geographically:
 Launch in major emerging economies like Brazil, Russia, etc.
 Product development
Quality improvement:
 Improve power and pick up.
 Better and comfortable interiors.

 New product development:

 Develop LPG and CNG versions for petrol versions.
 New technologies like hybrid and electric versions.
 Feature addition:
 Smart security system .
 GPS.
 Parking assistant.
 Rear wash wipers.
  Product line extension:
 Launch new model with more boot space and leg room.

 Diversification
 Car insurance.
 Car finance.
 Consultancy services on R&D. Integrative Growth

 Forward integration:
 Open its exclusive showrooms and dealerships.

 Backward integration:
 Entering manufacturing of key auto ancillaries.

 Horizontal integration:
 May acquire automobile R&D firm.
 Overseas acquisition.
CHALLENGES FACED BY TATA MOTORS AT THE TIME OF EXPANSION:
 The first is to adapt its social driven mission beyond India, and find ways to develop strategic
relationships with community and governmental partners while promoting a culture of
responsibility and buy-in amongst its increasingly diverse workforce.
 The second is Tata must continue to leverage the benefits of its CSR strategy into financially
profitable operations. The group’s aims of global expansion are dependent upon their access
to reliable capital markets, and
 Tata must demonstrate to potential investors that its CSR activities contribute to its financial
bottom line. In addition to sharing with investors the findings in

The Three Pillars of Sustainability 2020

1. Adapting to New Markets: Internal Sustainability
More than 140 years ago, Jamsetji Tata, the founder of the Tata Group, predicated economic
success on putting the community first and investing patiently in social initiatives. To date, this
strategy has enabled Tata to excel in India. A big reason for this is the brand recognition that Tata
enjoys in India. However, brand recognition is less of a competitive advantage as Tata expands
globally. Many argue that given the current heightened pace of globalization and change in
technology, Tata’s tenet of investing in long-term social initiatives threatens its short-term
competitiveness.
 The first challenge that Tata must address is to align its existing CSR policies, both internal
(in regards to the treatment of its workers and green initiative) as well as external (support for
surrounding communities) with the customs and challenges of the new markets in which it operates.
While Tata created a synergy between CSR and profits in India, it must recognize that, going
forward, no one-size-fits-all CSR strategy exists.

In order to facilitate a more effective alignment of local concerns with Tata’s global CSR
efforts, we propose setting up a New Markets CSR Committee under the TCCI that will be tasked
with collaborating with local executives, as well as civic and governmental leaders to identify and
drive social initiatives that will best benefit the communities in the new markets that Tata operates in.
As the Tata Group’s operations grow physically segregated, it becomes more difficult to align
activities with their values and purpose. To ensure this, we propose that the voluntary Tata Index be
made mandatory and moved under the TQMS group. To ensure fairness across companies that have
different levels of operations within and outside India, the New Markets CSR Committee will be
responsible for formulating the New Markets Multiplier Factor, which will normalize the Tata Index
to a common denominator for all group companies.

The next ten years will be crucial in the evolution of Tata as a global brand, and these steps
will ensure that domestic operations support the continued growth of Tata’s global brand and its
reflection of leadership in the field of corporate social responsibility.

2. Stepping it up a Notch: Evaluating Product Lifecycle Impact on Society

Throughout its history, the Tata group has been considered a poster child of ideal corporate
citizenship throughout India. Yet, as Judy Garland would put it, ‘Tata’s not in India anymore.’ As
Tata continues to expand globally, its responsibilities towards its stakeholders – investors,
employees, and communities – are changing. If anything, they are growing. Tata must increasingly
look beyond its own operations, and consider the impact of its products, both good and bad, on not
just the group’s direct shareholders, but on society as a whole. This focus on stakeholders will lead to
a sustainable competitive advantage and increased profits.1

To this end, we propose a Product Lifecycle Impact Metric . This metric will quantify the
projected impact of the Tata Group’s products and services over their expected lifetimes. While
taking the positive impact of the products and services (such as increased customer productivity,

1
above average fuel mileage, more affordable products etc.) into consideration, this metric will also
account for the negative impacts on society (such as increased traffic congestion, environmental
effects etc.). While an exact measurement would be impossible to obtain, by working within a
structured framework, and with the input of social and civic leaders, Tata could effectively estimate
these impacts across their various industries.

It recognizes that certain businesses or products, though highly profitable, are more prone to
have higher negative impacts on society. For instance, while some concerns regarding the Nano have
already been mentioned, one would be hard pressed to find many negative lifecycle impacts of the
watches manufactured by Titan Industries (besides the manufacturing, shipping, and eventual
disposal of the watches). To account for this, the Product Lifecycle Impact Metric, after much
analysis and discussion, will weigh the sustainability metrics in a manner that will neither unfairly
punish nor reward any of the companies within the Tata Group. Furthermore, this system will enable
the Tata group to exploit network synergies in order to better mitigate the negative lifecycle effects
that its various companies may have. For example, Tata Group’s broad umbrella of companies
provides Tata Motors a unique opportunity to alleviate this negative impact through collaboration
with other Tata companies. Tata Motors could collaborate with Tata Investment Corporation to
invest in public mass transit systems. In this case, the Product Lifecycle Impact Metric will credit
both Tata Motors and Tata Investment Corporation for their contribution to sustainability. The
Product Lifecycle Impact Metric will enable the Tata Group to measure and track the net lifecycle
impact that all its companies have on society, further enabling them to set realistic future CSR targets
and driving initiatives to reduce their overall impact on society. This system will enable Tata to drive
corporate social responsibility to the next level while creating value – societal value, brand value and
economic value

3. Aligning Purpose with Profit: Internal CSR Market

As the Tata group increases its global operations and dependence on global investors, it
comes under intense pressure to prove that focusing on the community as it has done until now can
continue to generate profits. Tata’s immense brand value has enabled it to escape skepticism in India
thus far, but with 65% of its revenues coming from outside India, this no longer applies. Global
investors, while impressed with Tata’s focus on corporate social responsibility, will want to see how
this greater purpose is aligned with profit.

The Internal CSR Market provides Tata with exactly this. The crux of this concept is a global
profit bonus pool that individual Tata companies can qualify for if they meet both their profit and
CSR goals. Failing to meet the profit goals automatically excludes a company from participating in
this bonus scheme. Once eligible, companies’ bonuses would also be determined by their progress
against an established percentage growth rate on the mandatory Tata Index. Any CSR points that the
company earns over its CSR goals can be exchanged for a greater share of the global profit bonus
pool, which would come at the expense of eligible firms that did not achieve satisfactory progress in
regards to the CSR

As Tata grows globally, it is essential to make sure that Tata companies from Vietnam to the
USA, and everywhere in between, are equally committed to the values and the purpose that Tata
adheres to. This will ensure credibility for the Tata Group in the eyes of consumers, governments,
and communities where it expands. As it has been shown, this credibility will enable the firm to
capture greater profits.2 The Internal CSR market provides Tata with this alignment mechanism,
while assuring global investors that Tata is motivated to generate consistent financial returns without
compromising on their commitment to CSR.

In order to successfully implement the aforementioned strategy over the next ten years, Tata must
ensure that every aspect of the strategy (i.e. metrics, incentives, accountability processes) align with
the group’s culture, operations, and overall business model. Most importantly, the revised internal
sustainability measures, product lifecycle standards, and internal CSR market procedures must build
upon the framework currently established by the Tata Index, the Tata Business Excellence Model,
and the Tata Values & Purpose Statement.

2
CONCLUSION AND FINDINGS:

 Due to the use of an advanced technology such as E-sourcing in procuring the spare provide
the best value for money to the customer.

 Effective supply chain management and customer relationship will boost the company to look
into other segment of vehicle.

 The continual improvement and introduction of new products in the market have allowed it to
successfully enter well as dominate the automobile industry in India.

 With manufacturing facilities and distribution centers along with expansion outside India, the
company the company has brighter future.

 Key routines that have developed and drive activities

1. Focusing on latest technology, customer preferences and needs
2. Innovation, excellence and technologically proven product
3. Building relations with distributors, suppliers and customers
SUGGESTIONS AND RECOMMENDATIONS :

Create Local Taskforce

The Tata group must create a task force dedicated to understanding the local social needs
within each potential market where it plans to expand. Doing so will have the double benefit on their
profitability by generating good will, as well as providing them with a deeper understanding of
potential customers.

Revise Internal Sustainability System to be More Flexible and subsequent rollout:

Utilizing the findings of the local task force, the Tata group must work on revising its
internal sustainability system to increase flexibility. This will enable each company within the Tata
group to adjust its sustainability system to reflect the needs of the local populations within which the
firm operates.

Increase Coordination with All Stakeholders

The Tata group must coordinate with NGOs, the UN, and state/local governments to better
understand how to measure the lifetime impact of Tata’s products and understand the implications of
this impact on environmental and social factors. During this phase, while retaining profitability, the
Tata group should analyze its overall contributions to the community and determine an acceptable*
net impact ratio to govern its future business decisions.
Rollout New Lifecycle based index:
Following the collaboration with all the stakeholders involved, Tata should engage in a
rollout of the new “lifecycle” optimized Tata index. This index should be continuously optimized to
ensure alignment with culture, operations, and profitability.

Commence rollout of CSR credits trading market:

Following the optimization of the Lifecycle based Tata Index, Tata should implement a two
year rollout of the CSR credits trading market. Initially, the market should carry few penalties for
those Tata companies that fail to meet their profitability and CSR targets. Over the next 24 months,
penalties should be incrementally phased in and revised to ensure alignment with Tata’s overall
strategy.

Implement and Revise CSR Trading Market as Necessary:

Over the remaining 4 ½ years, Tata should implement the CSR market strategy with
diligence and discipline. The Local Task Force should work in tandem with TCCI to ensure that the
implementation of the CSR market remains aligned with the needs of all the stakeholders involved in
the economic development of the Tata Group.

Future Ahead:
The next decade will prove to be a crucial one for the Tata Group. Will it continue its record
of growth as it expands into new markets, or does it lack the strategic depth to navigate the
challenges ahead? As it attempts to rise to these challenges, many analysts will continue to question
whether it has outgrown its commitment to CSR, and whether these commitments hinder its potential
success. Our analysis has attempted to develop a robust set of tools to evaluate these questions.
Ultimately, we have found that if Tata is to succeed it must not only retain, but reinforce, its
commitment to acting as a responsible social partner in the years to come.

Tata motors should look for the following aspects to survive in the future market:

 Human resource and Greater expansion will require more employees globally.
 Logistics platforms Keep looking for cheaper and faster ways to deliver products to the
consumer; increase the speed of the supply chain.
  Distributor platforms expanding distribution, service centers.
 IT and database platforms Increased use of cost reduction, spend management solutions like
Ariba to compete in the market.
 Technology platforms constantly improving technology and R&D centers.
 Assets, operations, and increased interaction between the supply chains.
 Systems platforms eliminate bottlenecks and deliver products faster to the consumer.

BIBLIOGRAPHY

1. http://www.fadaweb.com/autoind_june10.htm.

2. http://www.fadaweb.com/review_06.htm.

3. http://www.fadaweb.com/review_06.htm

4. http://www.carfreaks.info/porters-five-forces-analysis-indian-automobile-industry

5. http://www.marketresearch.com/product/display.asp?productid=1198991&g=1

6. http://www.oecd.org/dataoecd/53/35/40301081.pdf

7. http://www.surfindia.com/automobile/automobile-history.html

8. http://www.siamindia.com/scripts/market-share.aspx

9. http://ezinearticles.com/?Automobile-Sector---The-Indian-Scenario!&id=772205

10. http://business.mapsofindia.com/fdi-india/sectors/automobile-industry.html

11. www.google.com/tatamotors
12. Tata motors magazine and procedure tables.