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Established under the parent company, Tata Group, in 1945, Tata Motors Limited has become India’s largest automobile company. It was the first Indian automobile company to list on the New York Stock Exchange. Tata Motors began manufacturing commercial vehicles in 1954 with a 15-year collaboration agreement with Daimler Benz of Germany. This partnership has led Tata Motors to not only become India’s largest automobile company but also India’s largest commercial vehicle manufacturer; the world’s top five manufactures of medium and heavy trucks and the world’s second largest medium and heavy bus manufacturer. Having just entered the passenger vehicles market segment in 1991, Tata Motors now ranks second in India’s passenger vehicle market.
AUTOMOBILES TREND & CUSTOMERS SATISFACTION CONTENTS 1. Introduction 2. Competitive Environment and Critical Objectives of New Product Development. 3. Minimize time to market 4. Maximise fit with costumer environment 5. Optimising NPD Process 6. Company Information 7. Sales and Distribution 8. Distribution Channel 9. Objectives of the study 10. Research Methodology 11. Findings 12. Results of the analysis 13. Swot Aanalysis 14. Comparative Charts 15. Ouestionnare 16. 16.Bibliography TABLE OF CONTENTS INTRODUCTION ...........................................................................................................................3 CURRENT SITUATION.................................................................................................................3 Company Overview .............................................................................................................3 Corporate Governance .........................................................................................................5 Financial Position.................................................................................................................6 CORE COMPETENCIES ................................................................................................................7 Research & Development ....................................................................................................7 Acquisitions, Mergers & Expansion ....................................................................................9 Organization Location .......................................................................................................10 PEST ..............................................................................................................................................11 Political ..............................................................................................................................11 Economic ...........................................................................................................................13 Social..................................................................................................................................14 Technological .....................................................................................................................15 SWOT ANALYSIS .......................................................................................................................16 Strengths ............................................................................................................................16 Weaknesses ........................................................................................................................17 Opportunities......................................................................................................................18 Threats................................................................................................................................19 CAPITALIZING ON TATA MOTOR’S SUCCESS ....................................................................20 CONCLUSION ..............................................................................................................................21 WORKS CITED ............................................................................................................................22 APPENDIX A, B, C, D, E .............................................................................................................24 INTRODUCTION Established under the parent company, Tata Group, in 1945, Tata Motors Limited has become India’s largest automobile company. It was the first Indian automobile company to list on the New York Stock Exchange. Tata Motors began manufacturing commercial vehicles in 1954 with a 15-year collaboration agreement with Daimler Benz of Germany. This partnership has led Tata Motors to not only become India’s largest automobile company but also India’s largest commercial vehicle manufacturer; the world’s top five manufactures of medium and heavy trucks and the world’s second largest medium and heavy bus manufacturer. Having just entered the passenger vehicles market segment in 1991, Tata Motors now ranks second in India’s passenger vehicle market. Tata has enjoyed the prestige of having developed Tata Ace, India’s first indigenous light commercial vehicle; Tata Safari, India’s first sports utility vehicle; Tata Indica, India’s first indigenously manufactured passenger car; and the Nano, the world’s least expensive car. A full timeline of Tata Motors Limited is supplied in Appendix A. CURRENT SITUATION COMPANY OVERVIEW The Tata Motors group is a passenger and commercial vehicle manufacturer based in India. The motor group was established in 1945 as part of the larger Tata Group. They have long been known for their commercial vehicles and in the past ten years entered into the passenger car market. Currently, Tata Motors has a line of five passenger vehicles and a large line of commercial vehicles producing pickups, trucks, tractor trailers, tippers, and buses. Both product lines of the Tata Motors group have seen success, but much of this has been built upon the more deeply established commercial vehicle product line. Tata Motors commercial line has been established for several years in many market segments such as Europe, Africa, The Middle East, Australia, Southeast Asia, and South Asia. Tata Motors has expanded their business and market share around the world through a series of acquisitions. In 2004, they acquired Daewoo commercial vehicle Company in South Korea which was South Korea’s second largest truck manufacturer. This acquisition gave Tata Motors a significant presence in the Korean market. They have also entered into joint ventures with companies such as Thonburi Automotive in 2006, which allowed them to manufacture and market pickup trucks in Thailand. “We think it makes sense for Tata to expand through acquisition (as it did in tea and steel) than spend a decade to build the business” (Lehman Brothers). The commercial vehicle area of the business has certainly been how Tata Motors have built their reputation, with commercial vehicles accounting for 80-85% of company profits. They are beginning to employ a similar technique as they now expand into the passenger car business. Tata Motors have been making global headlines in the auto industry lately; the largest news being their acquisition of Jaguar and Land Rover from Ford. “Tata paid 2.3 billion dollars to Ford for the two brands that cost Ford 5.3 billion” (Carty, USA Today). This is a major step for the company because it catapults them into the luxury car business which they are not known for at this time. Tata, like many new businesses it acquires, is allowing this new segment of the business to be run by previous management since they have more experience in the luxury automotive business. “Tata will give us some space. They want us to run our business, be a premium British car company” (Mike O’Driscoll, managing director of Jaguar). This is yet another large acquisition for the Tata Motors group and could create great success for the company in the near future. Furthermore, Tata Motors made another large announcement regarding their progress in the passenger vehicle segment. In January they announced that they, “would release a $2,500 car that could replace the motor scooters commonly used in developing countries to cart around whole families” (Carty, USA Today). This is a major break through in the automotive industry and shows how far reaching, diverse, and competitive the Tata Motors group is becoming. Soon they will be serving customers in the high- class luxury market while still catering to their older niches in developing countries. CORPORATE GOVERNANCE Since Tata Motors is a part of a large conglomerate company it needs to have a strong corporate governance to ensure that its employees act ethically and the business continues to run smoothly especially during the ever changing and dynamic global economy. “Tata Group’s corporate governance is founded upon a rich legacy of fair, ethical, and transparent governance practices” (tatacarsworldwide.com). One of the more important parts of this is the transparency of the company people have a right to know what the company is doing not only to ensure ethical practices, but for the insurance of their many shareholders whom have a right to know the inner workings of the company. A full list of top management is visible in Appendix B. Tata has created some models for employees to guide themselves through everyday business practices to ensure that the corporate governance is continuously being upheld. The Tata business excellence model is upheld by Tata quality management services. Quality management is an in-house group dedicated to helping the various Tata companies achieve their business objectives through specific processes. The two main processes that the quality management services employees focus on are business excellence and business ethics. These two objectives have helped build Tata into the strong, dynamic company it is today. These models are entrenched in the company’s ethnical standards and Tata feels strongly about enforcing both throughout the company. “Tata quality management services plays the role of supporter and facilitator in the journey that Tata enterprises undertake to reach the peaks of business eminence while, at the same time, adhering to the highest ethical standards” (Tata.com). To further prove their commitment to quality and ethical practices Tata has introduced annual quality awards for those companies conducting business with the utmost quality. These awards are called the JRD quality value awards named after the late chairmen JRD Tata. These awards are presented annually on July 29th, the birthday of JRD Tata. Tata has committed to ensuring quality and ethical standards not only within Tata Motors, but throughout their many other branches and sectors of the Tata Group. They have done so by benchmarking quality standards through the Tata business excellence model as well as providing incentives for companies to strive to improve the quality of their service, by awarding JRD quality management awards. FINANCIAL POSITION Tata Motors have increased its earnings over the years through their various acquisitions and joint ventures with truck manufacturers in Southeast Asia. Gross profit in the year 2006 was 1,160.9 million and increased to 1,510.1 million in the year 2007. Earnings after taxes also increased significantly between 2006 and 2007 increasing from 336.6 million to 405.5 million in 2007. After a large drop in revenues from 2004 to 2005 when the company first went public on the NYSE (stock prices from May 1-22, 2008 can be found in Appendix C), it has been increasing revenues greatly annually, from 4,422.0 million in 2005 to 7,354.0 in 2007. Tata Motors income statement, balance sheet and statement of cash flows along with other key statistics can be found in Appendix D. CORE COMPETENCIES Tata Motors is able to maintain, as well as increase, their market share by capitalizing on their core competencies. Tata Motors is active, competitive, and dynamic in all aspects of the automotive industry, which means that there must be many different activities going on in all areas of the company. As a result of the ever evolving automotive industry Tata Motors must always be changing and one way to stay at the forefront of the industry is to make continuous improvements in technology through research and development. One way that Tata Motors has done this is by producing one of the most efficient and low cost vehicles on the market. Acquisitions, mergers, and expansion is another core competency that Tata Motors has is embedded in their company structure and philosophy. Another core competency that Tata Motors holds is being located in the India. This location has allowed them to understand not only the Indian market but also the dynamics of emerging and developing markets. This market understanding and knowledge allows Tata Motors to manufacture their products at lower costs, sell them to emerging markets while making profits as well as take advantage of the strong labor base in India. RESEARCH AND DEVELOPMENT One factor to Tata Motors success is their constant advances in automobile technology through research and development. There is a high emphasis on thorough research that provides the much-needed inspiration for the birth of new ideas, which in turn breathes new life into products. They employ approximately 1,400 scientists and development officers. Tata Motors has several research and development centers in India. The Research Center at Jamshedpur and the Engineering Research Center in Pune are among the finest in the country (Tata.com). They possess forums to develop and test durability, engine performance, emission, safety, design and style, noise, hydraulics, tracks, and instrumentation. Both have won numerous national awards in research and development efforts since their inception in 1966. Through these advanced research centers Tata has created sophisticated emission measurement systems and digital prototyping laboratories. Some other technologies that are part of Tata Motors’ arsenal are those that offer improved electronic controls for engine systems and other “vehicle drive-train and chassis systems” (Tata.com). The company is currently focused on equipping vehicles of the future with technologies for improving communication, navigation and entertainment. One example of these technological improvements is highlighted in the OneCAT (Appendix E). This concept car is a fiberglass vehicle that virtually powered by air and is emission free. The OneCAT weighs only a 350 kg and has a piston engine that runs on compressed air. This car can run between 200 to 300 kilometers on one Euro of compressed air. A spokesman for Moteur Development International, a company that partnered in the development of this car said, "The engine is efficient, cost-effective, scalable, and capable of other applications like power generation," (Autopartswarehouse.blog.com) This car is truly a representation of the next step in green automobiles. The car’s engine’s emission can be used as an air conditioner in the cabin. This car is very futuristic and is still in the development stages: “Nonetheless, Tata and Moteur Development International are confident that OneCAT, which can accommodate three adult passengers, is competent enough to go against potential green car rivals and energy efficient autos such as the hybrid, bio-fuels, and electric vehicles. The ‘air car’ is targeted for release this year with a base price of around £2,500.” (Autopartswarehouse.blog.com) Some of Tata Motors other technological advances can be seen in the new car the Nano nicknamed the People’s Car (Appendix E). This car, which is just emerging into the market, is the world’s cheapest car. Tata Motors achieved this is through using new materials such as, re-engineered plastics and modern adhesives. It will revolutionize the auto industry in India and soon in other emerging markets when Tata starts exporting. The Nano was able to achieve its low price and gain the attention of the entire automotive industry through its advances in materials and adhesives technology. ACQUISITIONS, MERGERS & EXPANSION Like other companies, Tata Motors is always growing and expanding and the main way they do this is through acquisitions and mergers. Since 2004, Tata Motors has merged or acquired all of or at least part of four different companies. In March 2004, Tata Motors acquired 100 percent of the Korean based Daewoo Commercial Vehicle Company, Korea’s second largest truck maker, for 102 million dollars. Rather than using de-culturation or assimilating Daewoo, Tata took an integrated approach, and continued building and marketing Daewoo’s current models as well as introducing a few new models globally just as it had been done under Korean management. In February 2005, they acquired 21 Percent of Hispano Carrocera, Spain-based company, for 12 million Euro. In April 2005, Tata Motors Limited merged with Tata Finance, and lastly in March 2008 Tata paid Ford Motor Company 2.3 billion for Jaguar and Land Rover companies (Tata.com). These acquisitions and mergers allow Tata Motors to break into foreign markets and develop a much larger share of the automotive industry. It also helps them attain the knowledge, technology, and programs that allow them to succeed in that particular sector of the automotive industry or in a particular region or culture. For instance, the purchase of Jaguar and Land Rover allows Tata to enter into the luxury car market without having to research the market, build the technology, among other important aspects of getting into a new market segment. It further helps them enter into the very competitive and highly desirable mature markets in Europe and in future hopes of securing market segments in the United States. Tata Motors is currently in a growth stage as stated on their website: “Tata Motors Ltd is in a mega expansion mode. The investments would be in product development, capital expenditure in capacity enhancement, domestic and international acquisitions and mergers” (Tata.com). ORGANIZATION LOCATION Tata Motors is located in the developing country of India. This location has been and will continue to be vital to Tata’s success. In India, Tata can take advantage of the fact that manufacturing labor cost is only eight to nine percent of sales, compared to 30 to 35 percent of sales in developed countries. In addition, India is one of the world’s largest producers of automotive components which give Tata Motors direct access to many of these components. Tata has higher bargaining power with suppliers because it is a local, not foreign, car manufacturer. Tata Motors is able to leverage Indian automotive market because the current increase in demand due to the improvements in infrastructure and growth of population and disposable incomes in India. The Society of Indian Automobile Manufacturers stated, “India, where some 1.4 million new cars are sold each year, is also a hugely attractive market for dozens of car companies and most of them can’t risk ignoring what appears to now be a potent competitive advantage for Tata Motors. India’s car market is expected to touch 2.2 million units a year by 2010” (Livemint.com). Additionally, the India government has made protectionist polices and regulations that are extremely favorable to Tata. In December 1997, the Indian government put in place policies that require foreign carmakers to invest at least 50 million dollars in equity to set up manufacturing operations in India. This means that Tata Motors is able to take advantage of the low cost of labor, land assets, and overall investment practices without having to implement this 50 million dollar investment. Finally, Tata Motors largest competitive advantage is that it has prospered and grown in only developing markets for over 70 years. Tata Motors has implemented programs that allow it to prosper while maintaining low costs and high profits. Lastly, Tata Motors has a competitive advantage simply because they are part of the larger Tata Group. Tata Group supplies Tata Motors with access to knowledge, resources, technology and companies operating in many different industries worldwide allowing innovation and easy availability to access other sources. PEST ANALYSIS POLITICAL Since Tata Motors operates in multiple countries across Europe, Africa, Asia, the Middle East, and Australia, it needs to pay close attention to the political climate but also laws and regulations in all the countries it operates in while also paying attention to regional governing bodies. Laws governing commerce, trade, growth, and investment are dependent on the local government as well as how successful local markets and economies will be due to regional, national and local influence. On March 26, 2008, Tata Motors reached an agreement with Ford to purchase Jaguar and Land Rover. In order to be capable of this acquisition, Tata Motors must have a full comprehension of the governing bodies and laws regulating commerce in the home country, the United Kingdom, but also in countries Jaguar and Land Rover operate in. In accordance, Tata’s headquarters in Mumbai, India, strictly controls and regulates operations in all dealerships and subsidiaries, in addition to knowing and abiding by all labor laws in the multiple countries where they have manufacturing plants it has to watch political change. This will be especially vital in the future as Tata Motors continues to expand and grow into new markets. “While currently about 18% of its revenues are from international business, the company's objective is to expand its international business, both through organic and inorganic growth routes” (Tata.com). The foundation of the company’s growth internationally is a deep understand of economic stimulation, customer needs, and individual government regulations and laws. Although it is the headquarters ultimate responsibility to make sure each individual office and branch is operating and abiding by the local laws, it will become increasingly more important for that duty to be taken care of at the regional or even local level. ECONOMIC Operating in numerous countries across the world, Tata Motors functions with a global economic perspective while focusing on each individual market. Because Tata is in a rapid growth period, expanding or forming a joint venture in over five countries world-wide since 2004, a global approach enables Tata Motors to adapt and learn from the many different regions within the whole automotive industry. They have experience and resources from five continents across the globe, thus when any variable changes in the market they can gather information and resources from all over the world to address any issues. For instance, if the price of the aluminum required to make engine blocks goes up in Kenya, Tata has the option to get the aluminum from other suppliers in Europe or Asia who they would normally get from for production in Ukraine or Russia. Tata Motors also has to pay close attention to shifts in currency rates throughout the world. Currency fluctuations can equate to higher or lower demands for Tata vehicles which in turn affect profitability. It can also mean a rise in costs or a drop in returns. But they also have to pay attention to not just the domestic currency, the rupee, but also to the dollar, euro, bhat, won, and pound, to just name a few. Just because the rupee is strong against the dollar does not mean it is strong against all the other currencies. Attention to currency is important because it influences where capital investment will develop and prosper. SOCIAL Undoubtedly, the beliefs, opinions, and general attitude of all the stakeholders in a company will affect how well a company performs. This includes every stakeholder from the CEO and President, down to the line workers who screw the door panel into place, from the investor to the customer, the culture and attitude of all these people will ultimately determine the future of a company and whether they will be profitable or not. For this reason, Tata Motors tends to use an integration and rarely separation technique with foreign companies they acquire. On the other hand, some economic issues that Tata Motors face must also be looked at from a more localized perspective. For instance, the market in India for cars is much different than the market for cars in Italy. For one, India has over one billion more people than Italy does, thus the market is much larger or not as limited. Second, you must also take into affect the demographics and the average income of each market. Italians have a higher average income per capita than Indians and Italian citizens tend to drive larger and fancier cars. For this reason, the Tata Nano might not do so well in the Italian market. In summation, Tata Motors views the economy from a global perspective with operations across the entire globe; however, they must also maintain a local market understanding and knowledge when it comes to product positioning and placement throughout the different markets Tata conducts business in. In 2004, Tata Motors acquired Daewoo Commercial Vehicles Company, which was at the time Korea’s second largest truck maker. Rather than using de-culturation or assimilating Daewoo, Tata took an integrated approach, and continued building and marketing Daewoo’s current models as well as introducing a few new models globally just as it had been done under Korean management. With the new acquisition of Jaguar and Land Rover, Tata will have to be careful with how they handle the acquisition. While Land Rover is thriving while under the helm of Ford, Jaguar was more of the trouble child. “Jaguar cost Ford some $10 billion during its 18-year stewardship and its sales were in headlong decline, especially in America, its most important market. Industry analysts also struggled to see what value Tata could add that had eluded Ford, and what synergies there could be between a maker of trucks and basic cars… and two luxury marques.” (Economist). Separation could be a good approach for the immediate future to keep the name of Jaguar and Land Rover distinguishable and associated with the luxury automobile market. Overall, Tata does a good job of integrating some aspects of their large multi-national conglomerate into new acquisitions; however, the company must also understand that separation from the name Tata can be valuable in some social areas. TECHNOLOGY Tata Motors and its parent company, the Tata Group, are ahead of the game in the technology field. The Tata Group as a whole has over 20 publicly listed enterprises and operates in more than 80 countries world-wide. This equates to Tata Motors having lots of experience and resources to draw from for research and development purposes. “The foundation of the company’s growth 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” (Tata). Employing 1,400 scientists and engineers, Tata Motors’ Research and Development team is ahead of the pack in India’s market and right with the rest of the field internationally. Among Tata’s firsts are “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,” as well as the increasingly famous Tata Nano, which is projected to be the world’s cheapest production car (Tata). In the automotive industry, it is becoming increasingly crucial for manufacturers to stay on top of the technology curve with new problems always rising such as escalating gas prices and pollution problems. Tata recognizes this and dedicates lots of resources and time into research and development to be even with or preferably ahead of other competitors, global trends, and changing economies. In all, an automobile manufacturer must change, adapt, and evolve to stay competitive in the automotive game, and this is exactly what Tata is doing with their rapid growth, and extensive research and development. SWOT ANALYSIS STRENGTHS Tata Motors excels when it comes to innovation through intensive research and development. Their ability to make the least expensive car on the market, the Nano which will retail for $2,500, is far beyond what any other car dealership has created. This innovation gives Tata Motors their main competitive advantage. Tata Motors makes everything from tractor-trailers to the world’s least expensive car. This product diversity grants them a competitive advantage over their competitors because they can satisfy more markets and customer needs. Another strength that Tata Motors possesses is high corporate responsibility. They donate a portion of their profits from stock increases towards a specific charity. This highlights Tata Motors overall desire for community improvement while also emphasizing Tata Motors’ high morals and values which is something money can not buy. Tata Motors is also a very eco-friendly company. One of their goals is to produce an emission friendly car, and in 2000 Tata Motors launched the first compressed natural air bus. This air bus requires the owner to plug the car into a standard electric plug for four hours to fill the air tanks. This brought the concept of an “air-car” to reality and the name for this compressed natural air car is “OneCAT.” OneCAT has no gas costs or fossil fuel emissions which makes it a very attractive car for the more mature markets but also the upper classes in developing countries at this point. It is also a great car to have in highly populated countries, such as China and India, because pollution with its adverse effects is a very large concern. OneCAT also is more efficient that any other present Hybrid car, so when inventors think they have the best product out on the market, they actually do not. There will always be something else to invent or improve on and Tata Motors is a prime example of that. Tata Motors is unique in a way in which when it buys a company. Tata Motors keeps the original management of that company intact. The company that Tata Motors purchases will look exactly the same in terms of management and organizational structure as if it was never purchased by Tata Motors. WEAKNESSES There are strings attached with every new invention and improvement on products. These strings are Tata Motors weaknesses and what other groups perceive as their weaknesses. One weakness that Tata Motors faces is its inability to meet safety standards. Although they have made the most inexpensive car out on the market, it has yet to pass all the safety standards which is a legal factor. Some consumers and pessimists inquire as to how Tata Motors can make such a cheap car and withstanding a car accident or not just falling apart after hitting something once. Pessimistic people also want to believe that car manufactures are already doing everything they can to keep costs low for the consumer, and if that is the case, then putting the cheapest car out on the market automatically questions if it is safe to drive. Tata Motors only have been making passenger cars for the approximately last ten years. This can be viewed as a weakness from a customer standpoint since a decade does not seem like a lot to consumers and therefore they will think that Tata Motors is inexperienced car manufacturing. Consumers will wonder how a car manufacturer can be in the market for 10 years and produce the cheapest car out on the market. How can Tata Motors manufacture such a cheap car that meets emission and safety standards being so young? This causes consumers to be skeptical. Another weakness that Tata Motors faces is within its domestic market. Car sales in India are less than 1 million annually. This draws a problem because Tata Motors may not get the sales that the company hopes for and how can they sell cars to people who are not buying cars? The new and innovative OneCAT still has some rough spots that need to be worked out and one of them is that it has pollutant emissions and greenhouse gas emissions from the generation of electricity used to compress the air. So although it is marketed as being emission free, it technically is not and this is another weakness. Also, OneCAT only goes 62 miles per hour for 56 miles in an urban cycle. This is not very far and Tata Motors will have to improve on this weakness as well as the emission weakness in order to draw more comsumers to this new automobile. OPPORTUNITIES Tata Motors has already opened the doors for many new and innovative ideas, but not only for their company, but their competitors as well which could turn into a threat. One of the major opportunities that Tata Motor faces is that as of right now 90 percent of China and India’s adult population do not own cars, partly because cars are costly and require more expenses after purchased. So the market for a low-priced car is huge which benefits Tata Motors perfectly since they produce the lowest priced car on the market. This is a huge opportunity for Tata Motors because if they can get their feet into that market of people that do not have cars because they cannot afford them, then they will make large profits down the road. China’s total car sales are estimated at over 8 million dollars annually and they were the world’s second largest car market in 2006. China’s government forecasts that demand for cars will top 20 million by 2020. With Tata Motors in the market with the cheapest car, China’s demand for cars will probably increase even more significantly which will in turn increase sales for Tata Motors. Japan, North America, and Europe automobile sales went up over the years because of demand for smaller cars increased. This demand for smaller cars is a great window of opportunity for Tata Motors because not only are their cars small, but they are cheap and environmentally friendly as well. Once people in these countries get Tata Motor automobiles then their automobile sales will continue to rise. As of March 2008 Tata Motors finalized a deal with Ford Motor Company to acquire the British businesses, Jaguar Cars and Land Rover. This is a huge opportunity for Tata Motors since they will acquire the large knowledge base and technologies for producing and marketing luxury vehicles. This acquisition helps them dive into the more mature markets in Japan, Europe and the U.S. The knowledge transfer from these two companies will greatly improve Tata Motors ability to continue to grow and flourish in both developing and developed market segments. THREATS The obvious threat to Tata Motors is intellectual property rights. Tata invented the cheapest car on the market and every automobile manufacturer wants to know how Tata did it. Headhunters are soon going to find out this valuable information and make it available to their own company. This is a huge threat to Tata Motors because at first they had low competition, but once other car manufactures find out how they invented such a low cost car, and then these companies too will jump on board and design their own line of low cost automobiles. On one hand this can be a threat, but on the other it may not affect Tata Motors at all because people will still want to purchase their product since they were the pioneers of all the excitement. Other companies are starting to compete for some of this market share. In fact, the Pakistan’s Transmission Motor company has built a basic four-wheeler for only $2,100. This car is considerably cheap and the Pakistan Transmission Motor company started exporting them to Sudan, Qatar, and Chile. This is going to be the beginning of new emerging car manufactures that will be producing low priced cars. Another obvious threat is that dealing with gas prices. Gas prices continue to rise and the Nano requires gas, but those who purchase the Nano probably do not have a lot of money and so if gas prices keep jumping up then that market of consumers will not be able to purchase the car. If OneCAT can be made as cheaply as the Nano then that will benefit the consumers even more because they will get a car that does not run on gas and it will be cheap to purchase. On the other hand, gas company will not want OneCAT to hit the market because there will be no profits to be made off the vehicle. Gas companies have a lot of say over the automobile industry so this could be a big threat. Another main concern that Tata Motors faces is that cheap cars in India will have an adverse effect on pollution and global warming because most of the population will be able to afford the cars. With more people driving cars there will be more accidents and deaths, as well as higher fossil fuels leaked into the environment causing even more pollution then there already is. Tata Motors is family owned and this can potentially cause problems down the road because some family members can become greedy and money hungry. Once they really start to rapidly grow then there may be family feuds and people not pulling their part. Another threat is the whole point of their cars being made with cheap plastic. Are these cars durable? Will they hold together in a head-on collision? As off August 2007 there was no further information on this topic though. CAPITALIZING ON TATA MOTORS’ SUCCESS Arguably, one of the most significant aspects of a business’s strategy is constant environmental scanning, or looking for opportunities that will either help a business grow or salvage plummeting profit margins and stock values. In the case of Tata Motors, and the creation of the Nano and OneCAT from a line of service and military vehicles provide a variety of different ways for other companies as well as other industries to capitalize on the success that Tata has realized. There are three main avenues that businesses can take to exploit the success that Tata Motors has generated. First, through acquisitions and mergers, like early discussed, Tata integrates the management, programs, and knowledge of the businesses it buys out. Secondly, Tata Motors places heavy investment into research and development. These two points have been discussed extensively throughout this report so please refer to the previous sections: Core Competencies and the SWOT Analysis. Finally, Tata understands and has succeeded in growing, profiting, and reducing costs in developing markets for over half a century. Tata Motors, like its parent company Tata Group, has much knowledge and understanding in working in developing markets and countries. Companies considering expanding into developing markets should consider forming a joint venture or partnership with any of Tata Group’s numerous industries. The knowledge transfer can save time and money and further ensure a more successful expansion. CONCLUSION Tata Motors is an overall strong company that has found strength and expansion through its parent company, Tata Group, but also through its numerous acquisitions and mergers. Although Tata Motors stock prices have fallen since the start of the 2008 year due to suggestions that Tata Motors is overreaching by adding luxury brands to pair with the Nano, the world's cheapest car. Chairman of Tata Group, Ratan Tata, rejects suggestions that, ``We're not trying to be a global player,'' he told reporters in New Delhi Jan. 10 after unveiling the Nano, which will be built in a new plant costing 10 billion rupees ($249 million). ``We will grow internationally in select markets'' (Krishnamoorthy). Works Cited Carty, Sharon. "Tata Motors to Buy Jaguar, Land Rover for $2.3B." USA Today. 12 May 2008 <www.usatoday.com>. Chang, Richard S. "Can Detroit Be Relevant?" The New York Times. 11 Jan. 2008. 22 May 2008 <http://wheels.blogs.nytimes.com/2008/01/11/can-detroit-be- relevant/>. "Corporate Governance." Tata Group. 13 May 2008 <www.tata.com>. David, Ruth. "Tata Motors: Ready to Take on the World?" 13 May 2008 <www.forbes.com>. Korzeniewski, Jeremy. "A New Agreement Between Tata Motors and MDI Bring the Air-Car Closer to Reality." 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International Herald Tribune. 17 Dec. 2007. 03 May 2008 <http://www.iht.com/articles/2007/12/17/business/ford.php>. Appendix A Tata Motors Timeline: 1945- Tata Engineering and Locomotive Co Ltd (TELCO) is set up as a locomotive maker at the end of World War II 1954- Company shift to making trucks in a joint venture with Germany’s Daimler-Benz 1961- Exports begin with the first truck begins being shipped to Ceylon (present-day Sri Lanka) 1977- First commercial vehicle manufactured in Pune 1983- Manufacture of heavy commercial vehicles commences 1986- Production of first light commercial vehicle 1991- Launch of the first passenger car, the Tata Sierra. One millionth vehicle rolled out. 1994- Enters joint venture to make Mercedes Benz cars in India 1999-Beings production of India’s first fully indigenous passenger car, the Indica 2002-Ends joint venture with Daimler 2002-TELCO is renamed Tata Motors Ltd. 2003-Tata Motors Ltd. Announces plan to build world’s cheapest car for 100,000 rupees (1,250 pounds or 2,500 dollars) 2004- Acquires South Korea’s Daewoo Commercial Vehicle Company and is listed on the New York Stock Exchange 2005- Buys 21 percent stake in Spanish bus maker Hispano Carrocera SA, launches mini- truck, the Ace 2006- Signs initial agreement with Fiat 2008- Unveils one-lakh (100,000 rupee) “People’s Car” also know as the Nano. Acquires Jaguar and Land Rover. Appendix B Top Management of Tata Motors Ltd. Name Age Since Current Position Sait, Zackria -- 2007 Vice President - Technical Services Mani, Shyam -- 2007 Vice President - Sales & Marketing, CVBU Rajarao, M. -- 2007 Vice President - Manufacturing, Pune Girotra, K. -- 2007 Vice President - Lucknow Works and FBV Tambe, S. -- 2007 Vice President - Human Resources Thakur, R. -- 2007 Vice President - Finance Gurav, P. -- 2007 Vice President - Corporate Finance - Accounts and Taxation Krishnan, S. -- 2007 Vice President - Commercial, PCBU Dube, Rajiv -- 2007 President - Passenger Cars Arya, A. -- 2007 President - Heavy and Medium Commercial Vehicles Mehta, V. 73 1998 Non-Executive Independent Director Wadia, N. 63 1998 Non-Executive Independent Director Palia, Sam 69 1998 Non-Executive Independent Director Soonawala, N. 72 1989 Non-Executive Director Irani, Jamshed 71 1993 Non-Executive Director Gopalakrishnan, Ramabadran 62 1998 Non-Executive Director Tata, Ratan 70 1996 Non-Executive Chairman of the Board Mashelkar, Raghunath 64 2007 Independent Director Mankad, A. -- 2007 Head - Car Plant Telang, P. 59 2007 Executive Director - Commercial Vehicles Sethna, H. -- 2007 Compliance Officer, Secretary Ramakrishnan, C. -- 2007 Chief Financial Officer, Executive Director Kant, Ravi 63 2005 Chief Executive Officer, Managing Director, Director Appendix E Above: Tata Nano Below: Tata OneCAT Mahindra & Mahindra Ltd. Established in year 1945, Mahindra & Mahindra Ltd. is a subsidiary of Mahindra group. The company manufactures general-purpose utility vehicles . Today, it is the 10th largest private sector company in India, which is into manufacturing of tractors and light commercial vehicles along with other general utility vehicles. With increased scope of work, company's business is divided into four divisions viz. automotive, tractor, inter trade and MSL. These divisions handle steel, trading and manufacturing of ash handling plants and traveling water screens. Rapidly expanding itself, now the company has seven state-of-the-art factories and 33 sales offices supported by a network of more than 500 dealers throughout the country. The company area exceeds over 5,00,000 square meters and over 17,000 technical and non - technical personnels are employed there. it is little known fact that the setup was called Mahindra & Mohammed and the company traded steel with suppliers in England and USA. M&M began its operations by assembling CKD jeeps in 1949. Later it obtained license from Kaiser Jeep and later from American ____ Motors (AMC) and started manufacturing jeeps in India. Branching out into manufacturing agricultural tractors and light commercial vehicles, M&M expanded its operations by launching UVs and SUVs like the Armada and Bolero respectively. Bolero penned the things to come which saw the hugely popular and successfull Scorpio make its mark in the Indian SUV market. The recent pact with Renault has seen the introduction of the Logan into the portfolio of Mahindra and hopefully things will march northwards from hereon. Aiming at bringing out a utility vehicle to rival the Toyota Innova, M&M will try hard to make the Ingenio as good as it can get. We wish them luck! The two brothers, J.C. Mahindra and K.C. Mahindra and Ghulam Mohammed formed the company, Mahindra & Mohammed, in 1945. Mahindra & Mohammed Limited was incorporated on October 2, 1945, as a private limited company. The company was renamed as Mahindra & Mahindra Ltd., on January 13, 1948. It was populary know by the acronym M&M. The company introduced Willys GPU vehicles in India in October 1947, when the first batch of seventy-five Willys GPU vehicles, were rolled onto the Indian roads.  M&M began producing light commercial vehicles (LCVs) in 1965. Th e U S$ 6. 3 bill io n M ah in dr a Gr ou p is a m on g th e to p 10 in du str ial ho us es in In di a. M ah in dr a & M ah in dr a e m ar ke t The Group has a leading presence in key sectors of the Indian economy, including the le financial services, trade and logistics, automotive components, information ad technology,infrastructure development and After-Market. er in m ulti - util ity ve hic les in In di a. over 62 years of manufacturing experience, the Mahindra Group has built a strong With It base in technology, engineering, marketing and distribution which are key to its evolutio m a customer-centric organization. The Group employs over 50,000 people and has as ad several state-of-the-art facilities in India and overseas. e a mil es to ne en try int o th e pa ss en ge r ca r se g m en t wit The Mahindra Group has ambitious global aspirations and has a presence on five continents. Mahindra products are today available on every continent except Antarctica. M&M has one tractor manufacturing plant in China, three assembly plants in the United States and one at Brisbane, Australia. It has made strategic acquisitions across the globe including Stokes Forgings (UK), Jeco Holding AG (Germany) and Schoneweiss & Co GmbH (Germany). Its global subsidiaries include Mahindra Europe Srl. based in Italy, Mahindra USA Inc. and Mahindra South Africa. M&M has entered into partnerships with international companies like Renault SA, Franc and International Truck and Engine Corporation, USA. Forbes has ranked the Mahindra Group in its Top 200 list of the World's Most Reputable Companies and in the Top 10 lis of Most Reputable Indian companies. Mahindra has recently been honoured with the Bombay Chamber Good Corporate Citizen Award for 2006-07. The history of the Honda Motor Company began with an autophile and his dream. Japanese entrepreneur Soichiro Honda had loved motor vehicles almost since birth. When he was fifteen, he became part of an auto repair shop, and the passion grew. His greatest dream was to become a world-renowned car racer, and it was an ambition which he would fulfill in time. But first, the auto lover found himself employed as a technician. During his free time, he nurtured his growing interest in motor vehicles by building race cars and tooling with his Harley motorcycle. Honda possessed a natural talent for anything motorized, and his skills allowed him to open the doors of his very own repair shop in 1928. As his curiosity grew, he attended technical school in order to discover the perfect way to manufacture a piston ring. Honda combined his inborn knowledge with his new technical knowledge to take the first tentative steps toward entrepreneurial success. He utilized what he had learned about piston rings to form the Tokai Seiki Company. In 1928, he secured his first of many patents (for automobile wheel spokes). Then, as World War II ravaged Japan, Honda cornered the market on badly needed generator motors. His growing capital allowed him to break ground on the Honda Technical Research Laboratory in 1946. Just two short years later, the Honda Motor Company, Ltd. would open its doors in Hamanatsu. The motor world would never be the same. The company initially found its niche in the manufacture of motorcycles. Following the launch of the company’s first success—the “C” model motorcycle—Honda and his then-twenty employees launched themselves into motor history with the three horsepower, two-speed transmission “D” model. The motorcycle was aptly named the “Dream D” after jubilant employees allegedly shouted “It’s like a dream!” upon its completion. And a dream it was. The “Dream D” was like a dream come true for the war-recovering Japanese society: it was inexpensive; it conserved valuable fuel; and, perhaps most importantly, it provided a temporary escape from the surrounding troubles. The overwhelming success of the “D” model and the later “E” model helped Honda build a reputation for quality and design supremacy, even when an early-1950s economic depression threatened to dim the company’s shining star. By 1955, Honda had weathered the storm and saw his dream at least partially realized when his company became the top motorcycle manufacturer in Japan. When those top sales figures expanded to include the world in 1959, Honda began to realize the enormous potential in a global expansion of his empire. While his business associates encouraged him to open a plant in either Europe or Southern Asia, Honda saw potential in another market: the American market. Marketing experts pleaded with Honda to change his mind, citing the low sales figures for motorcycles in the United States. But Honda and his trusted advisor Fujisawa ignored the pleas, realizing that America was becoming an increasingly important presence in the global marketplace. In 1959, newly appointed Executive Vice President and General Manager Kihachiro Kawashima officially introduced American Honda Motor Company to the American public. With a $250,000 “allowance,” the time was now or never for Honda America. Due to the disinterest of skeptical American dealers, AHMC set up shop in various hardware stores and sporting good stores. The new enterprise faced a hard sell to dealers and the public alike: the name Japan still held negative connotations for an American society struggling with its own wartime memories; fuel efficiency was not foremost in the minds of much of the public; and the vehicles of America were expected to be faster and leaner than their Japanese counterparts. However, at the same time AHMC was experiencing the growing pains of a rookie company, Soichiro Honda was fulfilling his lifelong dream of mastery on the racing circuit. He won the Isle of Man in the early 1960s, and continued a steadily rising string of successes on the race course. This publicity helped boost the Honda image in America, and Honda’s reputation was further boosted when it was honored with its first manufacturer’s award in 1962. The company also reached out to a weary public through an ambitious magazine advertising campaign that emphasized Honda’s strengths: dependability, fuel efficiency, simplicity, easy maintenance, and a unique (rebellious?) design. AHMC struck one final blow to the competition with its risky—and expensive!—advertising onslaught during the 1964 Academy Awards. But the ploy worked, jumpstarting sales by millions. Despite its slow start, AHMC was dominating sales in the same manner as its Japanese counterpart by the end of its fifth year (matching the original HMC’s 65% share of the market with its own impressive 62% share). Soon, the company would become the standard bearer in the industry, pioneering both the Motorcycle Industry Council and the Motorcycle Safety Council. It would also solidify its image with a series of philanthropic efforts. With the success of the American Honda Motor Company, Honda felt more confident than ever in his next goal: dominance in the automobile industry. He faced hurdles from the government, which delayed its approval for Honda's entrance into automobile manufacturing. Part of the reason for this hesitation was Honda’s subsidization of its US market, which led to questionable pricing practices in Japan. In spite of the initial delays, Honda unveiled its first automobile and truck products in 192. In 1969, American Honda also introduced its first automobile import, the N600 Sedan. The story was much the same: initial skepticism (could a motorcycle man really make effective automobiles?), followed by eventual success. The enormous popularity of Honda’s “CB” model motorcycles helped convince the public that their faith in Honda was well-placed. So, when Honda embarrassed the competition with his environmental-friendly Civic automobile (in a time of growing pollution concerns) in 1972, both the American public and the American government were more than receptive. Soon, Honda International Trading was exporting its now- successful American creations to Japan, closing the circle of success. When the top-selling Accord made its way onto American streets a few short months later, the Honda success story was finally complete: Japanese motorcycle supremacy, worldwide motorcycle supremacy, and now automobile supremacy. His vision finally fulfilled, Honda retired in 1973, leaving Kiyoshi Kawashima to carry on his legacy. Honda would witness the birth of yet another successful corporation (Honda of America Manufacturing in Marysville, Ohio), which would revolutionize the workplace with its emphasis on teamwork and cooperativeness. Honda would also be on hand for a Team Honda first-place victory in world motocross in 1981, for the crowning of a new American Honda president (Tetsuo Chino) in 1983, for a series of honorary distinctions (including a clean sweep of the Motor Trend Import Cars of the Year selections), and for a most fitting 25th anniversary present of record-setting sales. For all of his contributions and milestones, Soichiro Honda set another standard when he became the first Asian to be inducted into the U.S. Automotive Hall of Fame. Today, Honda’s selection of Accords, Civics, Preludes, Passports, Acuras, and Odysseys bear the Honda seal of excellence. Millions of motorcycle and automobile lovers around the world can attest to that excellence. Author: Tiffany Carrier About Author: Writer/Researcher: Tiffany Carrier holds a B.A. in English from Virginia Intermont College. She has researched and written on a wide range of subjects, from marketing to travel. She currently works as a freelance copywriter. Toyota Motor Corporation was Japan’s largest car company and the world’s third largest by the year 2000. The company was producing almost five million units annually in the late 1990s and controlled 9.8 percent of the global market for automobiles. Although its profits declined substantially during the global economic downturn of the early 1990s, Toyota responded by cutting costs and moving production to overseas markets. The company represented one of the true success stories in the history of manufacturing, its growth and success reflective of Japan’s astonishing resurgence following World War II. The Emergence of Japanese Automobile Manufacturing in the 1930s and 1940s In 1933 a Japanese man named Kiichiro Toyoda traveled to the United States, where he visited a number of automobile production plants. Upon his return to Japan, the young man established an automobile division within his father’s loom factory and in May 1935 produced his first prototype vehicle. General Motors and Ford already were operating assembly plants in Japan, but U.S. preeminence in the worldwide automotive industry did not deter Toyoda. Since Japan had very few natural resources, the company had every incentive to develop engines and vehicles that were highly fuel efficient. In 1939, the company established a research center to begin work on battery- powered vehicles. This was followed in 1940 by the establishment of the Toyoda Science Research Center (the nucleus of the Toyota Central Research and Development Laboratories, Inc.) and the Toyoda Works (later Aichi Steel Works, Ltd.). The next year Toyoda Machine Works, Ltd. was founded for the production of both machine tools and auto parts. As Japan became embroiled in World War II, the procurement of basic materials for automobile manufacturing became more and more difficult. At one point Toyoda was manufacturing trucks with no radiator grills, brakes only on the rear wheels, wooden seats, and a single headlight. Pushing toward the limits of resource conservation as the course of the war began to cripple Japan’s economy, the company started piecing together usable parts from wrecked or worn-out trucks in order to build ‘recycled’ vehicles. When the war ended in August 1945 most of Japan’s industrial facilities had been wrecked, and the Toyoda (or Toyota as it became known after the war) production plants had suffered extensively. The company had 3,000 employees but no working facilities, and the economic situation in Japan was chaotic. But the Japanese tradition of dedication and perseverance proved to be Toyota’s most powerful tool in the difficult task of reconstruction. Postwar Challenges and Innovations: The Birth of the Small Car Just as the Japanese motor industry as a whole was beginning to recover, there was mounting concern that American and European auto manufacturers would overwhelm the Japanese market with their economic and technical superiority. Japan’s automakers knew that they could no longer count on government protection in the form of high import duties or other barriers as they had before the war. Since American manufacturers were concentrating their efforts on medium- sized and larger cars, Toyota’s executives thought that by focusing on small cars the company could avoid a head-on market confrontation. Kiichiro Toyoda likened the postwar situation in Japan to that in England. ‘The British motorcar industry,’ he said, ‘also faces many difficulties, but its fate will be largely determined by how strongly American automakers feel they should concentrate on small cars.’ It was January 1947 when Toyota engineers completed their first prototype for a small car: its chassis was of the backbone type (never used before in Japan), its front suspension relied primarily on coil springs, and its maximum speed was 54 miles per hour. After two years of difficulties the company seemed headed for success. This was not to be accomplished as easily as expected, however. Two years later, in 1949, Toyota suffered its first and only serious conflict between labor and management. Nearly four years had passed since the end of the war, but Japan’s economy was still in poor shape: goods and materials of all kinds were in short supply, inflation was rampant, and people in the cities were forced to trade their clothing and home furnishings for rice or potatoes to survive. That year the Japanese government took measures to control runaway inflation in ways that severely reduced consumer purchasing power and worsened the already severely depressed domestic automotive market. Japanese auto manufacturers found themselves unable to raise the funds needed to support their recovery efforts, for the new governmental policy had discontinued all financing from city banks and the Reconstruction Finance Corporation. Under these conditions the company’s financial situation deteriorated rapidly. In some months, for example, the company produced vehicles worth a total of ¥350 million while income from sales reached only ¥250 million. In the absence of credit sources to bridge the imbalance, Toyota soon was facing a severe liquidity crisis. In large part because of wartime regulations and controls, Toyota had come to place strong emphasis on the production end of the business, so that in the early postwar years not enough attention had been paid to the proper balance between production and sales. The Japanese economy at that time was suffering from a severe depression, and because the Toyota dealers were unable to sell cars in sufficient quantities, these dealers had no choice but to pay Toyota in long-term promissory notes as inventories kept accumulating. Finally, Toyota was unable to meet its regular payroll. Delayed payments were followed by actual salary reductions and then by plans for large-scale layoffs–until April 1949, when the Toyota Labor Union went on strike. Negotiations between labor and management dragged on with the union leaders bitterly opposed to any layoffs. As a result, Toyota was compelled to reduce both production and overhead. Workers staged demonstrations to press their demands, and all the while Toyota kept falling further into debt, until the company finally found itself on the verge of bankruptcy. Production dropped to 992 vehicles in March 1949, to 619 in April, and to 304 in May. Crucial restructuring efforts included a proposal to incorporate Toyota’s sales division as a separate company, leading eventually to the formation of Toyota Motor Sales Company Ltd. in April 1950. Toyota Motor Sales Company handled all domestic and worldwide marketing of Toyota’s automotive products until July 1982, when it merged with Toyota Motor Company. In the meantime, discussions between labor and management finally focused on whether to admit failure, declare bankruptcy, and dissolve the company, or to agree on the dismissal of some employees and embark upon a rebuilding program. In the end management and labor agreed to reduce the total workforce from 8,000 to 6,000 employees, primarily by asking for voluntary resignations. At the management level, President Kiichiro Toyoda and all of his executive staff resigned. Kiichiro, Toyota’s founder and a pioneer of the Japanese automotive industry, died less than two years later. Not long after the strike was settled in 1950, two of the company’s new executives, Eiji Toyoda (now chairman of Toyota Motor Corporation) and Shoichi Saito (later chairman of Toyota Motor Company), visited the United States. Seeking new ideas for Toyota’s anticipated growth, they toured Ford Motor Company’s factories and observed the latest automobile production technology. One especially useful idea they brought home from their visit to Ford resulted in Toyota’s suggestion system, in which every employee was encouraged to make suggestions for improvements of any kind. On their return to Japan, however, the two men inaugurated an even more vital policy that remained in force at Toyota through the 1990s: the continuing commitment to invest in only the most modern production facilities as the key to advances in productivity and quality. Toyota moved quickly and aggressively in the 1950s, making capital investments in new equipment for all of the company’s production facilities. Not surprisingly, the company began to benefit from the increased efficiency almost immediately. Along with improvements in its production facilities, Toyota also worked to develop a more comprehensive line of vehicles to contribute toward the growing motorization of Japanese society. During 1951, for example, Toyota introduced the first four-wheel-drive Land Cruiser. Moreover, as the domestic demand for taxis rapidly increased, production of passenger cars also rose quickly, from 50 units per month to 250 units per month by 1953. In production control, Toyota introduced the ‘Kanban’ (or ’synchronized delivery’) system during 1954. The idea was derived from the supermarket system, where ‘consumers’ (those in the later production stages) took ‘products’ (parts) from the stock shelves, and the ’storekeepers’ (those in the earlier production stages) replenished the stock to the degree that it was depleted. The Kanban system became the basis for Toyota’s entire production system. By the early 1950s, just as Toyota had anticipated, the Japanese market was crowded with vehicles from the United States and Europe. It soon became apparent that to be competitive at home and abroad, Toyota would not only have to make additional investments in manufacturing facilities and equipment, but also undertake a major new research and development effort. This was the reasoning behind Toyota’s decision in 1958 to build a full-scale research center for the development of new automobiles (which also was to become Japan’s first factory devoted entirely to passenger-car production). Toyota also began to offer a more complete line of products. Beginning with the Crown model, introduced in 1955, Toyota quickly expanded its passenger-car line to include the 1,000-cubic-centimeter Corona, then added the Toyo-Ace (Japan’s first cab-over truck) and a large-sized diesel truck. Throughout these years Toyota also was working hard on another important, if less conventional, approach to adapting itself to the rapid motorization of Japan, brought about by a remarkable increase in national income. When, for example, Toyota Motor Sales was capitalized at ¥1 billion, 40 percent of that amount (¥400 million) was immediately invested to establish an automobile driving school in an effort to help citizens acquire driver’s licenses. Through this and similar efforts, Toyota made a major contribution to Japan’s growing motorization in the years following 1965, a trend that was to lead to a mass domestic market for automobiles. In 1955, ten years after its defeat in World War II, Japan became a member of the General Agreement on Tariffs and Trade (GATT); but automobiles remained one of Japan’s least competitive industries in the international arena. Toyota, foreseeing the coming age of large-scale international trade and capital liberalization in Japan, decided to focus on lowering its production costs and developing even more sophisticated cars, while at the same time attempting to achieve the highest possible level of quality in production. This was a joint effort conducted with Toyota’s many independent parts suppliers and one that proved so successful that ten years later, in 1965, Toyota was awarded the coveted Deming Prize for its quality- control achievements. That was also the year that the Japanese government liberalized imports of foreign passenger cars. Now Toyota was ready to compete with its overseas competitors–both in price and quality. In subsequent years Japan’s gross national product expanded rapidly, contributing to the impressive growth in auto sales to the Japanese public. The Toyota Corolla, which went on sale in 1966, quickly became Japan’s most popular family car and led the market for autos of its compact size. Toyota continued to make major investments in new plants and equipment to prepare for what it believed would be a higher market demand. In 1971 the government removed controls on capital investment. In the wake of this move, several Japanese automakers formed joint ventures or affiliations with U.S. automakers. Two years later, the 1973 Middle East War erupted and the world’s economy was shaken by the first international oil crisis. Japan, wholly dependent upon imports for its oil supply, was especially affected. The rate of inflation increased and demand for automobiles fell drastically. Yet, in the face of the overall pessimism that gripped the industry and the nation, Toyota’s chairman Eiji Toyoda proposed a highly aggressive corporate strategy. His conviction was that the automobile, far from being a “luxury,” had become and would remain a necessity for people at all levels of society. As a result, Toyota decided to move forward by expanding the company’s operations. The 1973 oil crisis and its aftermath were valuable lessons for Toyota. The crisis demonstrated the necessity for a flexible production system that could easily be adapted to changes in consumer preferences. For example, Toyota did away with facilities designed exclusively for the production of specific models and shifted instead to general-purpose facilities that could be operated according to changes in market demand for the company’s various models. Environmental Awareness in the 1970s In December 1970 the U.S. Congress passed the Muskie Act, which set limits on automobile engine emissions. In the United States the enforcement of this law was eventually postponed, but in Japan even stricter laws were promulgated during the same time with no postponement of enforcement deadlines. When the Muskie Act was first proposed, automakers all over the world were opposed to it. They argued that it would actually prohibit the use of all internal combustion engines currently used, and they requested that the enforcement of the law be postponed until new technology, able to meet the law’s requirements, could be developed. Notwithstanding these developments, Toyota moved forward on its own to develop a new generation of cleaner and more fuel-efficient engines. After studying all the feasible alternatives–including catalytic systems, rarefied combustion, rotary engines, gas turbine and battery-powered cars–Toyota settled on the catalytic converter as the most flexible and most promising and succeeded in producing automobiles that conformed to the world’s toughest emissions-control standards. (Meanwhile, imported cars were given a three-year grace period to conform to Japan’s strict emissions-control standards.) International Growth in the 1980s In 1980 Japan’s aggregate automobile production was actually better than that of the United States. In the same year, Toyota ranked second only to General Motors in total number of cars produced. Although Toyota made efforts over the years to improve the international cooperation between automakers, in such ways as procuring parts and materials from overseas manufacturers, Japan’s successes in the world auto market nonetheless resulted in the Japanese automobile industry becoming a target of criticism. Shoichiro Toyoda, president of Toyota during the middle and late 1980s, possessed a solid understanding of American culture. Toyoda reportedly believed that Toyota’s future success depended in part on the way it handled public relations with the United States, a nation that he perceived to be extremely bitter about losing trade battles with Japanese industry. By means of intense advertising and controlled public relations under Toyoda’s direction, Toyota tried to elevate the principle of free competition in the minds of the American people. At the same time, Toyoda carefully committed his company to greater international cooperation in both technological and managerial areas. In 1984, for example, Toyota entered into a joint manufacturing venture with American giant General Motors called New United Motor Manufacturing, Inc. (NUMMI). This state-of-the-art facility allowed Toyota to begin production in the United States cautiously at a time of increasing protectionism, as well as learn about American labor practices. At the same time, it provided General Motors with insight into Japanese production methods and management styles. The plant was slated to build up to 50,000 vehicles a year. In the fall of 1985, moreover, Toyota announced that it would build an $800,000 production facility near Lexington, Kentucky. The plant, which was expected to begin assembling 200,000 cars per year by 1988, created approximately 3,000 jobs. By the end of the 1980s, Toyota’s position as a powerful, exceptionally well-run car company was nearly unassailable. After a decade of prodigious growth, the company stood atop the Japanese automobile industry and ranked number three worldwide, a position it had held since 1978 and strengthened in the ensuing years. By the beginning of the 1990s, Toyota commanded an overwhelming 43 percent of the Japanese car market, and in the United States it sold, for the first time, more than one million cars and trucks. Aside from these two mainstay markets, Toyota was solidifying its global operations, particularly in Southeast Asia, and carving new markets in Latin America, where the burgeoning demand for cars promised much growth. Toyota also spearheaded the Japanese automobile industry’s foray into the luxury car market, leading the way with its Lexus LS400 luxury sedan, which by the mid-1990s was outselling market veterans BMW, Mercedes-Benz, and Jaguar. Despite these favorable developments, all of which pointed toward further growth and underscored the car company’s vitality, Toyota’s management continued to strive for improvements. In 1990, for example, when the company was posting enviable financial results and its manufacturing processes provided a model for other companies to follow, Shoichiro Toyoda eliminated two layers of middle management, effected substantial cuts in the company’s executive staff, and reorganized Toyota’s product development. With the highest operating margin of any carmaker in the world, Toyota was a formidable competitor. Toyota had little control over external forces, however, and as the 1990s progressed, a global economic downturn brought the prolific growth of Japan’s largest car manufacturer to a halt. The recession stifled economic growth throughout the world, while a rising yen made Japanese products relatively more expensive in overseas markets. Toyota’s profits declined for four consecutive years between 1991 and 1994, falling to the lowest level in more than a decade. Midway through Toyota’s net income slide, the company gained new leadership when Totsuro Toyoda succeeded his brother in September 1992. Under Totsuro Toyoda’s stewardship, a cost-cutting program was enacted that reduced expense account budgets 50 percent, limited travel expenditures, and eliminated white-collar overtime. Toyoda also continued the trend toward moving production to less expensive overseas markets by ordering the construction or expansion of six assembly plants in Great Britain, Pakistan, Thailand, Turkey, the United States, and Japan. As Toyota’s profit decline continued, however, the mounting losses persuaded Toyoda to intensify his cost-cutting measures. Design changes in the company’s vehicles coupled with reductions in manufacturing and distribution costs saved Toyota ¥150 billion in 1993, and another ¥100 billion in savings was expected to be realized in 1994. That same year, the fourth consecutive year of negative net income growth, Toyota recorded ¥125.8 billion in consolidated net income, a little more than a quarter of the total posted in 1990, when the company earned ¥441.3 billion. “The New Global Business Plan”: 1995 and Beyond When Hiroshi Okuda was promoted to company president in 1995 his chief ambition was to revitalize Toyota’s standing in the global marketplace. In June he unveiled Toyota’s New Global Business Plan, which placed renewed focus on innovation and international expansion. Okuda’s targets were clearly defined: to raise production to six million vehicles a year; to increase Toyota’s international market share to 10 percent; and to increase its share of the domestic market to 40 percent. He believed the first two goals would be achieved through the construction of new manufacturing plants in foreign markets, along with an increased emphasis on the “localization” of parts production. The purpose of localization was to reduce the time and expense involved with shipping components across great distances, enabling Toyota to increase its overall automobile production and devote greater resources to research and development. By widening the scope of operations in Toyota’s overseas locations, Okuda envisioned a more streamlined, cost-effective manufacturing process. Furthermore, the stimulation of local economies was an effective public relations tool, enhancing the value of the Toyota brand name in foreign markets. Okuda wasted no time putting his vision into practice. In 1995 Toyota announced its intention to set up a manufacturing operation in Indiana, in the hope of becoming a major participant in North America’s highly competitive large truck market. In 1997 the company opened new plants in Canada and India, and in December it announced plans to build a second European plant in Valenciennes, France, to begin production of a new line of cars specifically designed for the European consumer. The year 1997 also saw increased production in Toyota’s Thailand operations, with a total output of 240,000 vehicles. In 1998 the company also raised its export levels from the Thailand plants to 20,000 units, with most of the vehicles destined for the Australian and New Zealand markets. That same year, the company opened a new operation in Brazil, and in 1999 it began construction of a transmission production plant in the Walbrzych Special Economic Zone in Poland, which would begin exporting the parts to Toyota’s manufacturing centers in France, Turkey, and the United Kingdom by 2002. One of the most promising automobile markets to open up in the late 1990s was in China. By March 1998 Toyota already had stakes in four Chinese parts manufacturing plants, one of them a wholly owned subsidiary. The company took a more significant step in November 1998, when it established the Sichuan Toyota Motor Co., Ltd., Toyota’s first vehicle production plant in China. A joint venture with the Sichuan Station Wagon Factory and Toyota Tsusho Corp., the new plant was scheduled to begin manufacturing coaster-class buses by 2001. Okuda also assumed an aggressive approach to Toyota’s role in the domestic market. In late 1996 he made drastic cuts to Toyota’s vehicle prices in Japan, a move that incensed the competition. In August 1998 Toyota extended its hold over the domestic market with the purchase of a majority stake in Daihatsu. The company also implemented a number of environmental initiatives during this period, both at home and abroad. In July 1999 it inaugurated an initiative that aimed to eliminate all landfill waste by 2003, and in 2000 it introduced stricter environmental regulations in its U.S. manufacturing plants, which actually went beyond the current EPA standards. One of the most radical innovations to arise from Okuda’s revolution was the Prius, Toyota’s first hybrid car. Launched in October 1997, the Prius combined a highly efficient gas engine with a self-regenerating electric motor, reducing carbon dioxide emissions by half. Although initial estimates showed that production would have to surpass 200,000 vehicles a year for the Prius to turn a profit, by March 1998 demand was already surpassing supply, and the future of the eco-car on the domestic market looked promising. Prius finally hit the U.S. and European markets in late 2000, amid increased fuel prices and mounting concerns over global warming. Although a weakened euro caused Toyota to suffer losses in Europe toward the end of the 1990s, the new operation in France, scheduled to begin production in 2001 at a rate of 150,000 vehicles a year, was expected to reverse this trend. The company also experienced strong sales in the United States and Japan during this time, and in 2000 Toyota’s total worldwide production exceeded five million vehicles for the first time ever. Principal Subsidiaries: Toyota Motor Sales, U.S.A., Inc.; Toyota Motor Thailand Company Limited; Daihatsu Motor Co., Ltd. (51%); New United Motor Manufacturing, Inc. (U.S.A.; 50%); Toyota Motor Credit Corporation (U.S.A.); Hino Motors, Ltd. Principal Competitors: Ford Motor Company; General Motors Corporation; Honda Motor Co., Ltd. Key Dates: 1918: Sakichi Toyoda establishes Toyota Spinning & Weaving Co., Ltd. 1933: Automobile Department is created within Toyoda Automatic Loom Works. 1935: First Model A1 passenger car prototype is completed. 1937: Toyota Motor Co., Ltd. is formed. 1950: Toyota Motor Sales Co., Ltd. is established. 1956: Toyota creates the Toyopet dealer network. 1957: Toyota Motor Sales, U.S.A., Inc. is formed. 1962: Toyota Motor Thailand Co., Ltd. begins operations. 1982: Toyota Motor Company and Toyota Motor Sales merge to form Toyota Motor Corporation. 1995: Hiroshi Okuda becomes company president. 1997: The Prius, Toyota’s first ‘eco-car,’ is launched. 1998: Toyota acquires majority share in Daihatsu Motor Co., Ltd.
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