NANYANG TECHNOLOGICAL UNIVERSITY

SCHOOL OF MECHANICAL AND AEROSPACE ENGINEERING

MANAGEMENT OF TECHNOLOGY AND INNOVATION

STRATEGIC INNOVATIONS PROJECT

2010-2011

Team Members

Nagalingam Chellaiah Dhanasekhar (G0803363H)

Samajdar Shantanu (G0900774J)

Senjivel Senthil Kumaran (G0900779E)

INDEX NO. TABLE OF CONTENTS PAGE NO.

1. INTRODUCTION 1

2. COMPANY PROFILE 2

2.1 TATA GROUP AND ITS SUBSIDIARIES 5

3. ORGANIZATIONAL INNOVATIONS

SYSTEM 5

3.1 PRODUCTS 5

3.2 PROCESS 7

3.3 PEOPLE 8

4 INTRODUCTION TO THE NEW PRODUCT 10

DEVELOPMENT

5. INNOVATIONS INCORPORATED IN TATA

NANO 16

4.1 STRATEGIC INNOVATION 16

4.2 HOLISTIC INNOVATION 17

4.3 FOCUSSED INNOVATION 18

6 CHALLENGES FACED DURING THE

DEVELOPMENT OF TATA NANO 22

7 FUTURE OF TATA NANO 24

8 CONCLUSION 25
1. INTRODUCTION:
Seldom do we see cars that rewrite the history books even before they are seen
running around on the roads. And hardly ever do we see cars that vow to put the nation on
four wheels. The Tata Nano is one such car that has been in the news for quite a few years,
for reasons good and evil. Nano is a car which has breathed into life due to one man. Give
credit to Mr. Ratan Tata for his determination to build a low cost family car that has come
true, finally. Took long it did, but the Nano came in a beautiful form. Touted as world‘s
cheapest car by a far cry, Nano has been the talk of the town around the globe. Head honchos
of big organizations have been pouring in by numbers to have a look at this engineering
master piece. Nano as a part of a "new breed of 21st-century cars" that embody "a contrarian
philosophy of smaller, lighter, cheaper" and portend a new era in inexpensive personal
transportation and potentially, "global gridlock". The Wall Street Journal confirms a global
trend toward small cars, led by the Nano. The prefix "Nano" derives from the Greek root
'Nano‘s', meaning dwarf as with nanometer. "Nano" also means "small" in Gujarati, the
native language of the Tata family, founders of the Tata Group.
The project to create a 1 lakh rupees (3000SGD) car began in 2003, under the
Chairman of Tata Motors, Ratan Tata. The strategy behind the project was the awareness of
the number of Indian families who had two wheeled transport, but couldn't afford a four
wheel car, and was based on the company's success in producing the low cost 4 wheeled Ace
truck in May 2005.
To discuss the innovation strategy for Tata Nano, we first discuss the constraints as
per which the company had to operate.
In pursuit of excellence and to keep up to the initial promise made to people that
Tata will come out with a compact, quality car within a price tag of Rs. 1 lakhs(3000 SGD),
Tata Motors came up with a design, marketing and operational strategy keeping in my mind
the constraints of:
 Price
 Market Scalability
 Customer aspiration
 Resource efficiency

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2. COMPANY PROFILE:

Tata Motors Limited is India's largest automobile company, with consolidated revenues
of USD 14 billion in 2008-09. It is the leader in commercial vehicles in each segment, and
among the top three in passenger vehicles with winning products in the compact, midsize car
and utility vehicle segments. The company is the world's fourth largest truck manufacturer,
and the world's second largest bus manufacturer.

The company's 24,000 employees are guided by the vision to be "best in the manner in which
we operate best in the products we deliver and best in our value system and ethics."

Established in 1945, Tata Motors' presence indeed cuts across the length and breadth of India.
Over 4 million Tata vehicles ply on Indian roads, since the first rolled out in 1954. The
company's manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune
(Maharashtra), Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand) and Dharwad (Karnataka).
Following a strategic alliance with Fiat in 2005, it has set up an industrial joint venture with
Fiat Group Automobiles at Ranjangaon (Maharashtra) to produce both Fiat and Tata cars and
Fiat powertrains. The company is establishing a new plant at Sanand (Gujarat). The
company's dealership, sales, services and spare parts network comprises over 3500 touch
points. Tata Motors also distributes and markets Fiat branded cars in India.

Tata Motors, the first company from India's engineering sector to be listed in the New York
Stock Exchange (September 2004), has also emerged as an international automobile
company. Through subsidiaries and associate companies, Tata Motors has operations in the
UK, South Korea, Thailand and Spain. Among them is Jaguar Land Rover, a business
comprising the two iconic British brands that was acquired in 2008. In 2004, it acquired the
Daewoo Commercial Vehicles Company, South Korea's second largest truck maker. The
rechristened Tata Daewoo Commercial Vehicles Company has launched several new
products in the Korean market, while also exporting these products to several international
markets. Today two-thirds of heavy commercial vehicle exports out of South Korea are from
Tata Daewoo. In 2005, Tata Motors acquired a 21% stake in Hispano Carrocera, a reputed
Spanish bus and coach manufacturer, and subsequently the remaining stake in 2009.
Hispano's presence is being expanded in other markets. In 2006, Tata Motors formed a joint
venture with the Brazil-based Marcopolo, a global leader in body-building for buses and
coaches to manufacture fully-built buses and coaches for India and select

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international markets. In 2006, Tata Motors entered into joint venture with Thonburi
Automotive Assembly Plant Company of Thailand to manufacture and market the company's
pickup vehicles in Thailand. The new plant of Tata Motors (Thailand) has begun production
of the Xenon pickup truck, with the Xenon having been launched in Thailand in 2008.

Tata Motors is also expanding its international footprint, established through exports since
1961. The company's commercial and passenger vehicles are already being marketed in
several countries in Europe, Africa, the Middle East, South East Asia, South Asia and South
America. It has franchisee/joint venture assembly operations in Kenya, Bangladesh, Ukraine,
Russia, Senegal and South Africa.

The foundation of the company's growth over the last 50 years is a deep understanding of
economic stimuli and customer needs, and the ability to translate them into customer-desired
offerings through leading edge R&D. With over 3,000 engineers and scientists, the
company's Engineering Research Centre, established in 1966, has enabled pioneering
technologies and products. The company today has R&D centers in Pune, Jamshedpur,
Lucknow, Dharwad in India, and in South Korea, Spain, and the UK. It was Tata Motors,
which developed the first indigenously developed Light Commercial Vehicle, India's first
Sports Utility Vehicle and, in 1998, the Tata Indica, India's first fully indigenous passenger
car. Within two years of launch, Tata Indica became India's largest selling car in its segment.
In 2005, Tata Motors created a new segment by launching the Tata Ace, India's first
indigenously developed mini-truck.

In January 2008, Tata Motors unveiled its People's Car, the Tata Nano, which India and the
world have been looking forward to. The Tata Nano has been subsequently launched, as
planned, in India in March 2009. A development, which signifies a first for the global
automobile industry, the Nano brings the comfort and safety of a car within the reach of
thousands of families. The standard version has been priced at USD 2500 (excluding VAT
and transportation cost).

Designed with a family in mind, it has a roomy passenger compartment with generous leg
space and head room. It can comfortably seat four persons. Its mono-volume design will set a
new benchmark among small cars. Its safety performance exceeds regulatory requirements in
India. Its tailpipe emission performance too exceeds regulatory requirements. In terms
of overall pollutants, it has a lower pollution level than two-wheelers being

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manufactured in India today. The lean design strategy has helped minimize weight, which
helps maximize performance per unit of energy consumed and delivers high fuel efficiency.
The high fuel efficiency also ensures that the car has low carbon dioxide emissions, thereby
providing the twin benefits of an affordable transportation solution with a low carbon
footprint.

In May 2009, Tata Motors introduced ushered in a new era in the Indian automobile industry,
in keeping with its pioneering tradition, by unveiling its new range of world standard trucks
called Prima. In their power, speed, carrying capacity, operating economy and trims, they will
introduce new benchmarks in India and match the best in the world in performance at a lower
life-cycle cost.

Tata Motors is equally focused on environment-friendly technologies in emissions and

alternative fuels. . It has developed electric and hybrid vehicles both for personal and public
transportation. It has also been implementing several environment-friendly technologies in
manufacturing processes, significantly enhancing resource conservation

Through its subsidiaries, the company is engaged in engineering and automotive solutions,
construction equipment manufacturing, automotive vehicle components manufacturing and
supply chain activities, machine tools and factory automation solutions, high-precision
tooling and plastic and electronic components for automotive and computer applications, and
automotive retailing and service operations.

Tata Motors is committed to improving the quality of life of communities by working on four
thrust areas – employability, education, health and environment. The activities touch the lives
of more than a million citizens. The company's support on education and employability is
focused on youth and women. They range from schools to technical education institutes to
actual facilitation of income generation. In health, our intervention is in both preventive and
curative health care. The goal of environment protection is achieved through tree plantation,
conserving water and creating new water bodies and, last but not the least, by introducing
appropriate technologies in our vehicles and operations for constantly enhancing environment
care.

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With the foundation of its rich heritage, Tata Motors today is etching a refulgent future.

2.1 TATA GROUP AND ITS SUBSIDIARIES

TATA group‘s portfolio includes wide range of businesses which are leading in their
fields. Its total revenue in 2006-07 is $ 28.8 billion which is 3.2 % of India‘s GDP. TATA‘s
business empire extends to over 80 countries across 6 continents. Similar to Jack Welch‘s
opinion that the business should either be first or second else it is better to sell the business,
TATA groups companies excel it the fields wherever they started the business. TATA group
has ninety eight companies that are basically operating in seven sectors.

3. ORGANIZATIONAL INNOVATIONS SYSTEM

Innovation in Tata Motors is not a recent phenomenon, but is a part of its legacy. The
Company‘s culture of perpetual search for excellence is highly attributed to the Tata‘s ethos
and incessant efforts of its employees in the past several decades to serve the customers by
bringing continuous innovation in its products and processes.

The three major areas to illustrate how Tata Motors has effected innovation in the past few
years.
1. Products
2. Processes
3. People

3.1. PRODUCTS:

Tata Motors created several breakthrough products in the past which changed the
market dynamics and helped in providing a new customer experience.

407 platform in 1980s

Japanese LCV players had made inroads into the Indian automobile market in the 1980s.
Tata Motors came out with its innovative 407 platform which was designed to suit the Indian
conditions. It quickly became the bestseller in LCVs and the platform still continues control
2/3rd of the market even in the third decade of its existence.
Indica in the late 90s-
This was the first indigenously designed passenger car in India and it was innovative in

5
the sense that it provided more value for money in terms of internal space (comparable to the
Ambassador which was the benchmark in the country for internal space), contemporary
features (comparable to Maruti Zen) and all that at a very competitive price.

ACE
Ace was India‘s first mini-truck launched in 2005. While heavy trucks ply on the
Highways, research showed the need for a small sub one-ton truck for intercity and truck
terminal-to-nearby locations connectivity. The vehicle offered 4 wheeler functionality at 3
Wheelers price. The unconventional design features used in the vehicle were:
 Innovative 2 cylinder Indica engine
 Semi-monocoque body to withstand abuse
 Rigid front axle and rear wheel drive for low cost
 Flat face vs. semi-forward face to enhance the loading space.

NANO
The target price itself became the source of innovation, as you all must have read that
the big names in the industry just rubbished it as false claims and commented that it was
impossible to make a ―CAR‖ at that price. However, you all know that the promise was kept.
This was made possible through series of innovative ideas which led to acquisition of 37
patents by Tata Motors.
 Engine was packaged on the rear side.
 2 cylinder engine (conventionally there are 3-4 cylinder engines)
 Identical handles and mechanisms for left and right side doors
 Instrument cluster in the middle of the dashboard
 Unconventional seats
 Interior space was maximized by pushing wheels to the corners and power
train below the rear seat.

Product created was very contemporary and

 It has sufficient Space inside to accommodate 4 persons
comfortably.
 Highly fuel efficient
 Exceeds the current Safety requirements
 Complies with the current emission requirements.

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WORLD TRUCK
The new generation range of trucks which would match with the best in the world in
performance at a lower life-cycle cost is being unveiled in just a few hours from now. It will
create a new benchmark in India in terms of power, speed, carrying capacity, operating
economy and trims and a new experience for the drivers in terms of drivability and comfort.

3.2. PROCESS:
Sustainability of innovation in products needed to be complemented with innovative
changes in the organizational processes too. Some examples are:

1. Adoption of the Tata Business Excellence Model (TBEM)

It is based on Malcolm Baldridge Award for business excellence and Balance Score
Card. This has created a culture of exploring various innovative ways to achieve excellence
in all the organizational processes.
2. Use of IT systems:
It has been a benchmark and highly leveraged in the organization throughout the
VALUE CHAIN.
3. Supply Side
Free-Markets for e-Sourcing, Supplier Relationship Management (SRM).
4. Product Development Process.
Institutionalized Stage Gate process in the organization is a benchmark in itself and
ensures development of right product for the market and also an effective and efficient
program management. Transition from in-house product development to a collaborative
product development, utilizing the capabilities of suppliers, design houses, subsidiaries and
associate companies specializing in different verticals. Internalization philosophy of Tata
Motors made some major global acquisitions like TDCV, JLR, Hispano, etc. Unlike many
other Japanese / US players, they followed an innovative approach to be seen as a local
company in the country of operation, i.e, as a South Korean player in South Korea and as a
Spanish Player in Spain. This has helped them to appreciate the need and importance of all
the stakeholders and they achieved this in four stages. This involves – ―Initiating‖, by
understanding the language and basic facts of the country, ―Familiarization‖ with their
culture, ―Harmonization‖ and finally ―Synergizing‖ by sharing the best practices and work
ethics.

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3.3. PEOPLE:
The changing business environment and increasing complexity of business posed a
huge challenge in achievement of business plans. Tata Group, of which Tata Motors is a part
of, is well known for identifying and nurturing leaders. Tata Motors in the past has adopted
several innovative means to leverage its human resource capabilities for achieving extremely
challenging goals.

• Identifying leaders through assessment centers –

This process has been effectively utilized by Tata Motors to identify young
managers with very high potential. This process was started some 20 years back and
has progressively created a pool of very strong and effective leaders who have proven
their capabilities in some very challenging assignments given to them. This process
has now been replicated by many other organizations too.

• Putting them into challenging assignments and giving them International

exposure Key projects like ACE and NANO are examples of some challenging
projects which constituted of young leaders and engineers.

• Breaking the functional silos by shifting from a hierarchical organization to a

more CFT approach
All these experiences have helped us to redefine the way we have looked at
innovation. And while innovation is normally understood as introduction of new and
radical ideas in the area of products and services, our experience says there are several
other areas that also require innovation in tandem, so as to effect an innovation in a
company. Three of them I have already mentioned, that is, product, process and
people.
Four other areas of innovation
Source of inspiration/ Purpose from which the concept emanated, which stresses upon
the fact that agility and understanding the unstated/ unfulfilled need of customers is the most
important source of innovation. Tata Nano: In this case the idea struck in the mind of our
Chairman when he saw a family of four (a man, his wife and two kids) riding on a scooter on
a rainy day. He felt that there was an unfulfilled need of safe, affordable and an all weather
alternative.

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Price: The price of Nano got fixed at Rs 1 lakh (2500USD). The achievement of price target
was definite to create a major disruption in the car market as it fell midway between the price
of a scooter and the cheapest car available which was priced at Rs 2(5000USD) lakh. Product
design was choked for options because of the price target. Hence the setting the price as
target triggered a series of innovation which involved:
Target Cost approach – which involved breaking down the cost targets to sub-system and
then to component level.
Suppliers were challenged with the stringent cost target given to them, but they accepted the
same and the result is in front of you.

Promotion: Innovation lies in reaching the right customers always and communicating in a
simple and effective manner. Tata Motors in case of Nano developed a portal, which got as
high 30 million hits even before the launch of the car. After the launch there were another 30
million hits in less than a month. This helped the customers in becoming more aware of the
product features. They received around 2 lakh(.2 million) applications, which is a good
response by all standards.

Place/Reach:
Conscious of the fact that demand for such cars would be substantial from the remotest
corner of the country, the sale of form for booking were facilitated through several banks.
New insurance schemes were co-designed with the insurance companies, and now we are in
the process of enhancing the sales and service network for better reach and service to the
customers.

To summarize the experience, path breaking ideas, conceived and implemented in one
or more of the 7 Ps, leads to INNOVATION.

 Purpose
 Product
 Price
 Place
 Promotion
 People
 Process

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4. INTRODUCTION TO THE NEW PRODUCT DEVELOPMENT:

Before the introduction of a product into the market, it goes through several stages of
development. The stages of the product development includes the following

 Idea Generation
 Idea Screening
 Concept Testing and Development
 Market Strategy
 Business Analysis
 Total Sales Estimation
 Estimation Costs and Profits
 Product Development
 Test Marketing
As far as Nano is concerned, it falls new to the world products in the context that it has made
a history for the cheapest car ever made without compromising on quality. i.e. best way value
analysis.
Category Players 2002 2003 2004 2005 2006 2007
A Maruti 800 28 24 21 14 10 7
B Alto,WagnorR,Santro 33 41 47 57 64 75
,Indica
C Esteem, Swift, 12 15 18 22 26 33
Indigo, Ikon, Ascent
D Mercedes-C, Skoda 1 2 3 4
Superb
P/L Mercedes-E, BMw 1 1 1 1 1 1
74 81 88 96 104 120
Average Monthly Category Sales

4.1. IDEA GENERATION

The main idea behind TATA NANO was perceived by the chairman of TATA group
himself who saw a family of four going on a scooter in rain he wanted to develop a transport
which was affordable, safe and could face all types of weathers. This turned out to be the
most ambitious project of Tata motors till date when Mr Ratan Tata told this to one of his
managing directors Mr. Ravi Kant he was also interested about the idea. Mr. Ravi Kant had
learned from his experience that ―People want to move from two-wheelers to four-wheelers
but they cannot afford it‖. More and more can, but Indian car buyers today represent a

10
tiny slice of a potentially giant market India has just seven cars per 1,000 people. India's auto
industry has grown an average of 12% for the past decade, but just 1.3 million passenger
vehicles were sold in India in the fiscal year ending March 2006. That means a billion Indians
buy about the same number of cars in a year as 300 million Americans buy in a month. If four
wheels cost as little as two wheels, that could change fast. About 7 million scooters and
motorcycles were sold in India last year, typically for prices between 30,000 rupees and
70,000 rupees, about $675 to $1,600. Tata is targeting a price of 100,000 rupees one lakh, in
Indian 19 terms of measurement or about $2,500 at current exchange rates, for its small car.
That sounds impossibly cheap in the West but remains three times higher than India's annual
per capita income. The average pay for factory workers at Tata Motors is just $5,500 a year.

4.2. IDEA SCREENING

The next step was screening of ideas. There were many ideas like to make a scooter
with two extra wheels at the back for better stability, A three wheeled car like a closed auto-
rickshaw but the market requirement was a car, the car should be such that it doesn‘t convey
a message that it‘s just an extension of a scooter it should be a proper car and likewise should
also give the feel of a actual car. Trying to build a car cheap enough for motorcycle buyers
seems to make sense now but seemed unachievable several years ago when Mr. Ratan Tata,
chairman of Tata Motors had first mentioned his dream of building a one-lakh car in
2003 at that time the whole world thought that this gamble will never work out but ironically
the whole world is now talking of small cars as $5,000 or $7,000 after TATA NANO was
launched in 2009.

4.3. CONCEPT TESTING AND DEVELOPMENT

After surveying customers the end result was that people wanted a four wheeler which
was cheap, dependable and strong enough to carry a load of 1 ton additionally four wheelers
also increased the social status of the person who owns it .Four wheels not only practical
appeal but also had a emotional appeal. Thus the new product was now to be developed but
the following considerations would have to kept in mind when developing it-

 The car should be built on a different platform than conventional ones.

 It must be meeting all the safety and regulatory requirements.

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  It has to be built on a scale which shall be more than double the earlier launches of
similar products and the ramp up must be smooth.
 The car has to be designed so that it can be exported to other countries as the domestic
demand may not materialize as per projections.
There were three main requirement of the new vehicle: it should be low cost, adhere to the
regulatory requirements, and achieve performance targets such as fuel efficiency and
acceleration capacity. Nearly 500 engineers were involved in the development of the vehicle
and everyday they had meeting so that the decision taking and the problem solving process
could be accelerated. Each engineer represented a different part of the car: engine and
transmission, body, vehicle integration, safety and regulation, and industrial design. The body
of the vehicle had to go under a number of iterations because the Mr.Ratan Tata wanted that a
person whose height is over six feet can also fit into the car without any discomfort and
finally the length of the car had to be increased by 100mm but eventually. The hard work of
designing the car paid off and the designers were successful in their attempt to design an
actual car which did not look shabby and inexpensive but looked sleek and sophisticated.

4.4. BUSINESS ANALYSIS:

COST:
Since the car had to be built within a cost of Rs. 1 Lac, no conventional design would
work as the costs shall be higher and so the entire car has to be redesigned.
The design has to question the need of each and every component from the point of view of
its necessity of existence and also the minimum requirements of its functionality. Value
Engineering concepts have to be deployed to finalize the minimum requirements.

DISRUPTIVE TECHNOLOGY:
It‘s a technology which brings radical change by introducing new ways of doing
things.
Technology that is
 Significantly cheaper than existing Technology.
 Much higher performing?
 Has greater functionality and
 Is more convenient to Use.
 Brings to market a totally different Value proposition than the one available
and can change the Paradigm about a product.

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The Guiding factor was that the cost has to be minimized for each component yet maintaining
its basic functionality. The Alternatives are:
 Reduce Consumption of Material being used.
 Alternate Suppliers to get same material at fewer prices.
 Use alternate materials.
 Eliminate use of Material.
 Eliminate a process Or a Combination of the above.

COST REDUCTION PARADIGM:

Value Engineering Alternatives:

The target was very clearly defined that, within the given cost structure all the
components have to be allocated and the same had to be achieved using the available
alternatives.
The Guiding factor was that the tax structure on materials and manufacturing must support
the final cost. Decisions were
 Establish factory in a tax free zone.
 Get the tax advantages on infrastructure development.
 Get the suppliers to establish base near the factory.
 Get special concessions from State Govt.
In short select a manufacturing location where all the advantages could be achieved.

4.5. TOTAL SALES ESTIMATION:

The total sales had been estimated based on the following decisions
 It was estimated that the demand for the people‘s car shall be at least twice the
demand for Maruti 800, the lowest end car.
 Initial projections were at about 500,000 cars per year.
 The basic reason was the conviction that the target price shall redefine the 4 - wheeler
segment.
 The price decision of Rs 1 lakh is definitely going to make a lot many people transit
to
4-wheeler fold and that shall explode the demand.
 Only 10% customers of 9 Million two wheeler market transit to 4-wheelers it
shall amount to 50% of the passenger car market share.

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  It was decided to set up plants with 5 lakhs cars per annum capacity and ramp the
same up in stages, in line with increase in market demand.

4.6. MARKETING:

Product:
Tata has a very wide range of products it has passenger cars, utility vehicles, Trucks,
Commercial passenger Carriers and Defense Vehicles.
 Nano received media attention due to its targeted low price.

 The Tata Nano is a rear-engine, four passenger ,city car built by Tata Motors,

 It was first presented at the 9th annual Auto Expo on 10 January 2008, at Pragati
Maidan in New Delhi, India.

 Aimed primarily at the Indian market.

Price:
The prices of Tata motors are generally affordable acceptable by the general public at
large. Tata always have something for the lower class people with Nano being their trump
card. Giving discount every month and special promotion for certain type of vehicle also one
of the strong strategy use by Tata Motors. Discount can be made from Company‘s profit or
from dealer‘s profit at certain range.

Pricing strategies:
 Penetration pricing

 Low pricing policy with minimum profit margin.

 Though the one lakh price tag is not fixed by TATA group, it was the word of mouth
of people which fixed that range. This expectation of people creates a big challenge
for the company.
Place:
Tata Motors has an extensive dealer network covering Indian and International
markets. Wherever you are, there is a Tata Motors Sales and Service dealership close to you.
The channel of distribution, physical location, and dealership method of distribution and sales
is generally adopted. The distribution of vehicle must be in a very systematic way,

14
from the plant to dealership and to end user. This is not only in India itself but also to the
world-wide dealership.
Promotion:
Tata motors promote their products via Advertising and after sales services.
• Enough use of one of the most important element of promotion mix, publicity reduces
the necessity of other promotional devices for Nano.

• Publicity as ―One lakh car‖ by mouth to mouth.

• Auto expo 2008,New Delhi & Geneva

• Publicity through print & electronic media

For other type of promotional activities, cost factor that is 1 lakh price tag is to be keep in
mind, nano watches, nano T-shirts available in retail clothing stores. Advertising: - TV &
other mass media will be less effective, thus too much money will not be invested in this
regard. Mainly word of mouth advertising will get more emphasis. Internet will be a major
media for advertising.

People:
Tata Motors owe their success to the highly motivated and talented staff. There
recruitment division picks the crème-de-la-crème from premier universities, management and
engineering institutes in India. They put them through rigorous training programmes to hone
their entrepreneurial skills and impart comprehensive product knowledge.

Processes:
Tata motors follow Balanced Scorecard Collaborative, Inc for achieving excellence in
overall Company performance.
Physical Evidence:
The management of the company has managed to keep their hopes alive even in this
recession and hoped that the worse is behind Tata Motors recently launched the most awaited
car of the year, Tata Nano and the company had already received 203,000 booking that are
fully paid and 70 percent of the applicants are ready to wait till the end of 2010 for the car to
be manufactured.

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5. INNOVATIONS INCORPORATED IN TATA NANO:

At this moment, a fair amount of information on how the Nano was brought to its
intended price tag without compromising its design brief - 'a proper car'. The report attempts
to study the tactics and policies adopted by Tata‘s under the enlightened approach to
innovation.
 Strategic Innovation
 Focused Innovation
 Holistic Innovation
5.1 Strategic Innovation:
Some of the innovations that Tata Motors followed during the process of coming out with
Nano were not only concerned with the only the car as the product, but extended itself to the
whole organizational thought process. Starting from the team formation to product delivery,
everything was thought keeping in mind the promise of bringing out a quality car within a
price tag of Rs. 1 lakh that would fulfill the latent demand of the Indian middle class who
could not afford even the lowest priced car at that time.
 The whole idea was radical and required fresh thinking and challenging of age old
principles of product designing and manufacturing technologies. Inline with this, the
engineering team in charge with the designing and production of Nano was very
young with the average age being only 28.
 Tata Motors were not shy to unlearn and re-learn the processes and they were open to
take in ideas from their strategic partners also. During development, the company
reinvented and minimized the manufacturing process, brought in innovative product
design, and asked component manufacturers to look at current work and design
approaches in a different perspective to produce logical and simple solutions.
 The strategy behind the project was the awareness of the number of Indian families
who had two wheeled transport, but couldn't afford a four wheel car, and was based
on the company's success in producing the low cost 4 wheeled Ace truck in May
2005. The company management learnt and improved on the design procedure of Ace
truck and used this know-how to come up with the best design for Tata Nano. Also,
since both the vehicles were similar in their basic design and component requirement,
the supplier base was also easier to be put in place.

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  Even after successfully launching the petrol and diesel variants of Nano, Tata Motors
have not rested on the laurels. They have taken one step further in coming out with an
electric version which enables them to position it as an environment friendly car of
the future. This shows the foresightedness of the management to sense future demand
and also the company culture to continuously innovate and improve.
 Tata Motors set their retail price target before they designed the car. Doing so let them
establish their demographic. Setting the price and working backwards also required a
fundamental shift in the way the car was designed, since many costs are fixed once
the design is set.
 Workers at the Tata Motors factory have been trained in Japanese manufacturing
techniques that call for continuous improvement.

5.2 Holistic Innovation:

 Tata Motors worked in collaboration with their suppliers very early in the process - so
early in fact that they were able to provide functional goals for many parts rather than
technical specs (i.e. wipe water from windshield vs. windshield wiper must be x mm
by y cm and work at z cadence). This approach tapped the ingenuity of the supply
chain, who delivered parts that met the functional requirements and extremely low
prices.
 Another cost cutting strategy – ‗Tata Motors‘ distributed assembly model, where they
ship the parts to local manufacturers for final assembly. The next strategic thinking
Tata Motors have to undertake to check if the policy can be applied to all the other car
models to allow them to be customized as per the local customer needs.
 Working closely with the sourcing team led to many interesting inputs on what was
possible and what was not. The driving instrument cluster is uniquely placed in the
centre, giving the car an open look and enabling everyone in the car to look at it. It
also makes the dashboard equally amenable to left hand and right hand driving.
 The top management, even Mr. Ratan Tata was actively involved in the designing
phase of the car. Inputs from all the teams were taken to come up with the best design.
 Manufacturing planning: The interesting challenge here was that aiming for a very
low cost car meant the entire organisation had to be leaned down – not just
manufacturing, but materials, design, human resources, and so on. The team has taken

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 the benefit of best practices from other industries such as cycle manufacturing or PC
manufacturing that involves mass manufacture and assembly.
 Quality systems have been thought about, put in place and well documented well in
advance; so implementation becomes easier. The maintenance practices - failure
mode analysis and development – had all been completed. This ensured all this during
the planning phase itself and this reduced the breakdowns when the project started
and cut down unexpected challenges once the actual implementation started.
 Suppliers located within 50 kms of the main manufacturing plant which reduces
transportation cost and fosters just in time procurement strategy.

5.3 Focused Innovation:

 The Nano has 21% more interior space and 8% smaller exterior, when compared with
its closest rival, the Maruti 800. The car will come in different versions, including one
standard and two deluxe variants. The deluxe version will have air conditioning, but
no power steering.
 The use of a rear mounted engine to help maximize interior space.
 The Nano complies with Bharat Stage-III and Euro-IV emission standards.
 Fuel economy : 20 kilometres per litre
 The car conforms to environmental protection, and will have the lowest emissions in
India. Thus it douses the fear in the mind of the environmentalists about it being the
reason of shooting up emission limits for mass adoption as well as the perceived
notion of cheap products being of bad quality. The Nano will also replace many
overloaded and worn-out two-stroke polluting vehicles, both two and three-wheeled.
 With a length of 3.1 metres, width of 1.5 metres and height of 1.6 metres, with
adequate ground clearance, it can effortlessly manoeuvre on busy roads in cities as
well as in rural areas.
 Its mono-volume design, with wheels at the corners and the power train at the rear,
enables it to uniquely combine both space and manoeuvrability, which will set a new
benchmark among small cars.
 The lean design strategy has helped minimise weight, which helps maximise
performance per unit of energy consumed and delivers high fuel efficiency.
 With an all sheet-metal body, it has a strong passenger compartment, with safety

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 features such as crumple zones, intrusion-resistant doors, seat belts, strong seats and
anchorages, and the rear tailgate glass bonded to the body.
 Tubeless tyres further enhance safety.
 The high fuel efficiency also ensures that the car has low carbon dioxide emissions,
thereby providing the twin benefits of an affordable transportation solution with a low
carbon footprint.
 The mono-volume design establishes a sea of change from the two-box layout of the
800. What it ensures the Nano with is extremely short overhangs and tight packaging.
For a car of this size and image, the Nano is an extremely sexy looking car with
futuristic design cues. The bonnet line is steep and unites together with the bumper in
a seamless way.
How could Tata Motors make a car so inexpensively?
 No Radio, Power windows, air conditioning, anti lock brakes, air bags, remote locks
or power steering.
 Rear wheel drive: manually actuated 4-speed trans axle that gives the car better fuel
efficiency
 Wheel Bearing: Wheel bearing is strong enough to drive the car at 72kmph but would
quickly wear out at higher speeds.
 Analogue speedometer, odometer and fuel gauge.
 Single windscreen wiper
 Fundamentally, the engineers worked to do more with less. The car is smaller in
overall dimensions than the Maruti, but it offers about 20 per cent more seating
capacity as a result of design choices such as putting the wheels at the extreme edges
of the car.

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 Car Maker Introduction HP Price(USD)

Model T Ford 1908 20 19700

Beetle VW 1956 24 11333

Mini Cooper 1961 34 11777

Nano Tata 2008 33 2500

Nano-Lowest ever

 Modular Design Revolution:

One of the most significant dimensions of innovation is its modular design. The Nano
is constructed of components that can be built and shipped separately to be assembled
in a variety of locations. In effect, the Nano is being sold in kits that are distributed,
assembled, and serviced by local entrepreneurs. The company could produce the mass
items and ship it to them as kits.
 Open Distribution Innovation:
Tata have called this 'open distribution' innovation because it mobilizes large numbers
of third parties to reach remote rural consumers, tailor the products and services to
more effectively serve their needs, and add value to the core product or service

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 through ancillary services. Three innovations in products and processes come together
to support ‗Open distribution':
1. Increased modularity (both in products and processes)
2. Aggressive leveraging of existing third-party, often non-commercial, institutions in
rural areas to more effectively reach target customers
3. Creative use of information technology, carefully integrated with social institutions, to
encourage use and deliver even greater value
4. Modular designs combined with creative leverage of local third-party institutions help
participants to get better faster.

 Welcoming users back into the design loop:

The Tata Motors/Nano approach contrasts with the strategy of most other
manufacturers. For more established automakers each new model represents an
advance in tight integration, with more and more of the functionality deeply
embedded in electronics that truly represent a 'black box' to the customer. The days of
customising cars to personalise them and push their performance limits are rapidly
receding into distant memory for the average customer.
 Vendor Management Policy:
Tata Nano got some car parts from vendors who did their own research and
development for them to reduce cost. Some vendors developed products with Tata
Motors, and quite a few were given designs by Tata Motors. The company even
helped some vendors find international partners to make products that met the
company's requirements. Some vendors who supplied parts to Tata Nano did
competitive buying of material from countries like China and Thailand. This is very
similar to leveraging an onsite offshore model in IT.

6. CHALLENGES FACED DURING THE DEVELOPMENT OF TATA NANO:

After much speculation, Tata Motors announced on May 19, 2006 that it will be
manufacturing Tata Nano from Singur, Bengal. However, within a week protests were started
by a few farmers in the area against the acquisition of their lands by Tata. The cause was
taken up by Mamata Banerjee, the leader of Congress. The situation escalated with Tata‘s
threatening to pull out and disruption of compensation for farmers who had volunteered to
sell their land by anti-acquisition activists. This was followed by a state-

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wide strike by Trinamool Congress in October. The government banned political parties from
holding meetings or processions at Singur and installed a huge police force there. There was
widespread violence in the clashes between the police and the farmers on December 2, 2006.

The Key concerns are

 Safety
 Emissions
 Congestions

1. Question of Safety

The Nano has an all sheet-metal body made from Japanese and Korean steel, with
safety features such as crumple zones, intrusion-resistant doors, seat-belts, strong seats and
anchorages, and the rear tailgate glass bonded to the body. Tires are tubeless

2. Mass Motorization

As the Nano was conceived and designed around introducing the automobile to a
sector of the population who are currently using eco-friendly bicycles and motorcycles,
environmentalists are concerned that its extraordinarily low price might lead to mass
motorization in countries like India and therefore possibly aggravate pollution as well as
increase the demand for oil. The ecology focused German newspaper die tageszeitung feels
that such concerns are "inappropriate" as the Tata Nano has lower emissions compared to the
average Volkswagen, and that developing countries shouldn't be denied the right to motorized
mobility when industrialized countries should be looking to reduce their emissions and usage
of cars. Die Weltre ports that the car conforms to environmental protection, and will have the
lowest emissions in India.

In crowded metropolitan cities like Mumbai, Ratan Tata has conceived a scheme to only offer
the Nano to those individuals who do not have an automobile already. The Nano will also
replace many overloaded and worn-out two-stroke polluting vehicles, both two and three-
wheeled. According to Anumita Roychowdhury, associate director of the Centre for Science
and Environment in New Delhi, "the low-cost cars will be disastrous" in the current policy
and regulatory framework.

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3. Used car market effects:

The Nano is alleged to have severely affected the used car market in India, as many
Indians opt to wait for the Nano's release rather than buying used cars, such as the Maruti
800 (a rebadged Suzuki Alto), which is considered as the Nano's nearest competitor. Sales of
new Maruti 800s have dropped by 20%, and used ones by 30% following the unveiling of the
Nano. As one automotive journalist summarizes; ―People are asking themselves—and us—
why they should pay, say, 250,000 Rupees for a Maruti Alto, when they can wait and get a
brand new Nano for less in a few months‘ time, a car that is actually bigger‖.

4. Cases of Fire

There have been 7 cases where the Nano caught fire, with the first three attributed to
an electrical fault in the steering column. Tata Motors has since replaced the OEM supplying
the fire retardant material as well as the steering column assembly. In March 2010, a new
case of a Tata Nano catching fire was reported, in which the car was being delivered from the
dealership to the owner's house. This case is currently under investigation.

5. Competitors

Rival car makers including Bajaj Auto, Fiat, General Motors, Ford
Motor, Hyundai and Toyota Motor have all expressed interest in building small cars in India
that are affordable to more middle-class consumers in emerging markets. The bulk of demand
there is for small cars because people are much more sensitive to fuel prices. Honda and
Toyota are leading the way on so called cleaner gasoline-electric hybrids, and some
environmentalists argue getting prices down on these technologies is where efforts should be
concentrated. Inexpensive and eco-friendly electric-cars like Tara Tiny (which has an engine
producing 4 hp compared to Nano's 33 hp), Oreva Super (both reportedly even cheaper than
Tata Nano) and REVA pose even more significant danger to Nano. There are also rumors
of Maruti Suzuki introducing a lower priced version of Alto to counter Tata Nano.

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 Maruti 800 Tata Nano bike

Engine 796 cc 623 cc 100 cc

Price(OTR) Rs 225,000 Rs 120,000(88%) 45,000

DP Rs 10,000 Rs 10,000 Rs 5000

EMI(60m) Rs 3583 Rs 1833(95%) Rs 667

Kmpl 15 20 50

Nano vs Maruti 800 Vs Bike- Ownership Cost

7. FUTURE OF TATA NANO:

 Emerging markets are a fertile ground for innovation. The challenge of reaching
dispersed, low income consumers in emerging markets often spurs significant
innovation.
 As customers gain more power, they will demand more tailoring and value added
services to meet their need. Companies which innovate on this dimension are likely to
be richly rewarded.
 World is getting tougher day by day being unique is a competitive advantage.
Expectations to Tata Nano have proved this.
 After 100 years to Henry Ford, Tata has not only proved him again not only he came
out of the expectations but also came out with a platform for Indian auto sector.

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CONCLUSION:

In the conclusion we can say that Nano has truly lived up to its expectations and shattered the
following myths

 Cheap means unsafe- physically validated crash test results on 1 vehicle and plans
more tests in the future
 Rear- engine cars are unsafe- Ferrari, Porsche, VW and Lamborghini do it why can‘t
Tata?
 The Nano will pollute the planet- 623cc engine produces less CO2 than average Eu
small car.
 The Nano will have no storage space-Sufficient storage space, under the bonnet and
over the rear parcel tray, rear seats fold to dramatically increase storage space.

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