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

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 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 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.

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.

 Products
  Processes
 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 inthe 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 the
sense that it provided more value for money in terms of internal space (comparable to the

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.

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:

 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.
 Use of IT systems: It has been a benchmark and highly leveraged in the organization
throughout the VALUE CHAIN.
 Supply Side: Free-Markets for e-Sourcing, Supplier Relationship Management (SRM).
 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 philosophyofTata
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.

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/ Purposefrom 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.

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

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.

Average Monthly Category Sales

Category Players 2002 2003 2004 2005 2006 2007

A Maruti 800 28 24 21 14 10 7
B Alto,WagnorR,Santro,Indica 33 41 47 57 64 75
C Esteem, Swift, Indigo, Ikon, Ascent 12 15 18 22 26 33
D Mercedes-C, Skoda Superb 1 2 3 4
P/L Mercedes-E, BMw 1 1 1 1 1 1
74 81 88 96 104 120

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 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.
 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 every day 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.

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.
 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, 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.
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.
 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 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
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.

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

o 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.

o 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 through ancillary
services. Three innovations in products and processes come together to support ‘open
distribution':

 Increased modularity (both in products and processes)

 Aggressive leveraging of existing third-party, often non-commercial, institutions in
rural areas to more effectively reach target customers
 Creative use of information technology, carefully integrated with social institutions, to
encourage use and deliver even greater value
 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.

o 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 fromSingur, 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 byMamata Banerjee, the leader ofCongress. 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-
widestrikeby 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 fromJapaneseandKoreansteel, 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 usingeco-friendlybicycles and motorcycles,
environmentalists are concerned that its extraordinarily low price might lead to mass
motorization in countries like India and therefore possibly aggravatepollutionas well as
increase the demand foroil. Theecologyfocused German newspaperdie tageszeitungfeels
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 likeMumbai, 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 toAnumita Roychowdhury, associate director of theCentre for
Science and Environmentin New Delhi, "the low-cost cars will be disastrous" in the current
policy and regulatory framework.

3. Used car market effects:

The Nano is alleged to have severely affected theused carmarket in India, as many Indians
opt to wait for the Nano's release rather than buying used cars, such as theMaruti 800(a
rebadgedSuzuki 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 includingBajaj Auto,Fiat,General Motors,Ford Motor,HyundaiandToyota

Motorhave all expressed interest in building small cars in India that are affordable to more
middle-class consumers inemerging markets. The bulk of demand there is forsmall
carsbecause people are much more sensitive tofuel prices.Honda and Toyota are leading
the way on so called cleanergasoline-electric hybrids, and some environmentalists argue
getting prices down on these technologies is where efforts should be concentrated.
Inexpensive and eco-friendly electric-cars likeTara Tiny(which has an engine producing 4
hp compared to Nano's 33 hp),Oreva Super(both reportedly even cheaper than Tata Nano)
andREVApose even more significant danger to Nano. There are also rumors ofMaruti
Suzukiintroducing a lower priced version ofAltoto counter Tata Nano.

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.
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.