Tata Motors Going Global
TATA Motors-International Business Indian Automobile Industry Hailed as ‘the industry of industries’ by Peter Drucker, the founding father of the study of management, in 1946, the automobile industry had evolved continuously with changing timesfrom craft production in 1890s to mass production in 1910s to lean production techniques in the1970s. The automotive industry in India grew at a computed annual growth rate (CAGR) of 11. 5 percentover the past five years, the Economic Survey 2008-09 tabled in parliament on 2 nd July’09 said.The industry has a strong multiplier effect on the economy due to its deep forward and backwardlinkages with several key segments of the economy, a finance ministry statement said. The automobile industry, which was plagued by the economic downturn amidst a credit crisis,managed a growth of 0. 7 percent in 2008-09 with passenger car sales registering 1.
31 percentgrowth while the commercial vehicles segment slumped 21. 7 percent. Indian automobile industry has come a long way to from the era of the Ambassador car to Maruti800 to latest M&M Xylo.The industry is highly competitive with a number of global and Indiancompanies present today. It is projected to be the third largest auto industry by 2030 and just behind to US & China, according to a report. The industry is estimated to be a US$ 34 billionindustry. Indian Automobile industry can be divided into three segments i.
e. two wheeler, three wheeler &four wheeler segment. The domestic two-wheeler market is dominated by Indian as well asforeign players such as Hero Honda, Bajaj Auto, Honda Motors, TVS Motors, and Suzuki etc.Maruti Udyog and Tata Motors are the leading passenger car manufacturers in the country. AndIndia is considered as strategic market by Suzuki, Yamaha, etc. Commercial Vehicle market iscatered by players like Tata Motors, Ashok Leyland, Volvo, Force Motors, Eicher Motors etc. The major players have not left any stone unturned to be global.
Major of the players have gotinto the merger activities with their foreign counterparts. Like Maruti with Suzuki, Hero withHonda, Tata with Fiat, Mahindra with Renault, Force Motors with Mann. Key Facts: • India ranks 12th in the list of the world’s top 15 automakers •Entry of more international players • Contributes 5% to the GDP • Production of four wheelers in India has increased from 9. 3 lakh units in 2002-03 to 23lakh units in 2007-08 • Targeted to be of $ 145 Billion by 2016 • Exports increased from 84,000 units in 2002-03 to 280,000 units in 2007-08 TATA Motors-International Business Submitted by: Sameer, Sohail, Sankar, Himanshu, Arun Page 5 Porter’s Five Forces Analysis of Indian Automobile Sector1. Industry Rivalry • Industry Concentration: The Concentration Ratio (CR) indicates the percent of market share held by a company.A high concentration ratio indicates that a high concentration of market share is held bythe largest firms – the industry is concentrated. With only a few firms holding a largemarket share, the market is less competitive (closer to a monopoly).
A low concentrationratio indicates that the industry is characterized by many rivals, none of which has asignificant market share. These fragmented markets are said to be competitive. If rivalryamong firms in an industry is low, the industry is considered to be disciplined • High Fixed costs When total costs are mostly fixed costs, the firm must produce capacity to attain thelowest unit costs.Since the firm must sell this large quantity of product, high levels of production lead to a fight for market share and results in increased rivalry. The industry istypically capital intensive and thus involves high fixed costs • Slow market growth In growing market, firms can improve their economies. Though the market growth has been impressive in the last few years (about 8 to 15%), it takes a beat in even slighteconomic disturbances as it involves a luxury good. Aggressive pricing is needed tosustain growth in such situations • Diversity of rivals: Industry becomes unstable as the diversification increases.