CAPSTONE CASE

TATA MOTORS: BECOMING A GAME

CHANGER

Karthik T

Nasarvali Shaik
Rohit Joshi

Rohit Ramachandran
Samaresh Paikara

MEP - 6, Group # 9

TATA MOTORS WHERE WE STAND NOW

New leadership under Guenter Butschek who replaces the late Karl
Slym
Outside the top 5 in passenger cars segment with 5% contribution
Revamped passenger cars market increasing but product range (Zest,
Bolt, Tiago, Nano Twist) not able to meet the pulse of the market
LCV, M & HCV market fairly stable, Mahindra on product and
marketing rampage & inching towards Tata*
Jaguar Land Rover growing internationally but affected by glut in
Chinese market. Domestic sales lagging.

* As on April 2016, Mahindra has overtaken Tata motors in sales of sub 3.5 tonne CVs

CAPSTONES
Strategic

Financial
Performance

Operations

Structure

Human
Resources

ORGANISATION DESIGN
What bonds the stakeholders

MISSION
STRATEGY

VALUES
SENSE OF
MISSION

SENSE OF
MISSION
ACHIEVEMENTS
STAKE
HOLDERS

CULTURE

VISION-MISSION STATEMENT

ORGANISATION STRUCTURE
Organisation bounded by mission and culture
Business is divided into several categories- Commercial vehicles,
passenger cars, spare parts and accessories and financing for
customers
The organization has adapted matrix structure to handle its
multinational operations
Operational structure is hierarchical but somewhat flat, it helps them
in easy interaction between various level in structure which improves
sharing of knowledge and ideas within Organization
The open structure of company prevents any singular stakeholders
having dominant influence
A notion of Power Equilibrium between stakeholders fostered via an
open organisation structure

EVIDENCE OF EFFECTIVENESS
Mission Statement Present
Internal & External Stakeholders Interests reflected in Mission
Purpose Why the Organisation Exists

Vision
What the organisation wants to be

Values
What the Organisation Believes In

Organisational Culture
Breeding ground for Values having its fruits and flowers in form of Vision
and Mission

Tata Code of Conduct and Whistle Blower Policy

Employees have right to expose whatever things are going wrong which
would affect the company and help them to think as everyone is part of the
company

MEASURE OF EFFECTIVENESS-CONTROL
Concept: Being best in the manner in which it operate, best in
the products it deliver, and best in our value system and ethics
Systematic approach: Execute with action plan on execution ,
stakeholder participation, timing, presentation etc.
Monitor and Control: Key Performance Indicators (KPI) and
Key Performance Measures (KPM)
Invented and followed Enterprise Process Model
Helped to entail the process in more clarified way in terms of role
and responsibilities
Helped company to work as a team

MEASURE OF EFFECTIVENESS-INNOVATION
Disruptive innovation
Innovate to attain vision of becoming a leading manufacturer and
reduce environmental pollution

MEASURE OF EFFECTIVENESS-EFFICIENCY
Ensured emotional attachment of Stakeholders
Focus on major core competency factors to be the best in the industry
The organisational structure, with its many stakeholders, controls
their individual influence
There is a strong sense of Mission, guiding overall strategy

BALANCED SCORECARD

Customer

Financial

Business
Strategy

Learning &
Growth

Internal
Business
Processes

FINANCIAL PERSPECTIVE (CONSOLIDATED)

Tata Motors struggling to maintain their average earnings per
share overtime, even after demonstrating effective leadership
and corporate governance.

2011

2012

2013

2014

2015

Rev=
1221(bn)

Rev=
1656(bn)

Rev=
1887(bn)

Rev=
2366(bn)

Rev=
2663(bn)

PAT=
92.97(bn)

PAT=
135.16(bn)

PAT=
98.92(bn)

PAT=
139.91(bn)

PAT=
139.86(bn)

EPS= -

EPS= 42.58

EPS= 31.02

EPS= 43.41

EPS= 43.44

Div=200%

Div=200%

Div=100%

Div=100%

Div= 0%

NOTE: *TATA MOTORS SPLIT ITS SHARE IN 2011 IN 1:5 RATIO

FINANCIAL PERSPECTIVE (STANDALONE)

Tata Motors struggling to maintain their average earnings per
share overtime, even after demonstrating effective leadership
and corporate governance.

2011

2012

2013

2014

2015

Rev=
509(bn)

Rev=
589(bn)

Rev=
489(bn)

Rev=
373(bn)

Rev=
391(bn)

PBT=
21.97(bn)

PBT=
13.41(bn)

PBT=
1.75(bn)

PBT=
(10.26)(bn)

PBT=
(39.75)(bn)

EPS= 6.06

EPS= 3.90

EPS= 0.93

EPS= 1.03

EPS=
(14.72)

Div =200%

Div=200%

Div=100%

Div=100%

Div=0%

NOTE: TATA MOTORS SPLIT ITS SHARE IN 2011 IN 1:5 RATIO

DECLINE IN INCOME AND MARKET SHARE

FINANCIAL PERSPECTIVE

2011 2012 2013 2014 2015

Net Operating Cash Flow (in

billion $)

91.83 161.73 182.12 306.74 296.54

Capital Expenditure (in billion $)

81.24 138.76 187.57 269.75 316.14

Avg. Dollar Rate

Free Cash Flow* (in billion )

45

50

55

60

65

476.55 1148.5 -299.75 2219.4

-1274

Assessment:
Cash is the real asset that firms generate. FCF gives a much clearer view of
the ability to generate profits. Tata Motors FCF has been fluctuating in the
trend where cash flows from operating activities is increasing but capital
expenditure is sometimes more than that. This is resulting in negative FCF in
some years. However, when Tata Motors will start earning profit from its
investments, the trend will change.
* Source = http://www.marketwatch.com/investing/stock/ttm/financials/cash-flow

CONSUMER PERSPECTIVE

Strategic Objectives

Predicting

Customer Needs

Plenty of Choice
It is a demand driven, and customer-oriented, taking
care of customers preferences and taste.
Long list of portfolios:
Its products include passenger cars, trucks, vans and
coaches. It is worlds 4th biggest truck producer, it is
also worlds second biggest bus producer.
At your door step
Dealership, Sales and Service Access: The Companys
dealership, sales, services and spare parts network
comprises over 3500 touch points.

CONSUMER PERSPECTIVE

Strategic Objectives

Occasional Event for targeted loyal

customers.
Tata Delight : exclusive loyalty program that offers
Gaining Customer
great benefits, special privileges and fabulous rewards
Loyalty
Key account customers and small commercial
vehicle customers can also avail benefits like
discounted service & repair bills at Tata Motors

Customer
Service

Online Customer Service

The group focuses on managing the customer
engagement through the widespread network of over
1600 authorized service touch points.
Acts as link between manufacturing plants and
customers, providing vital inputs to product

LEARNING & GROWTH PERSPECTIVE

Catch them young
and provide
responsibilities
(ESS)

Education & Arts

Reward
professionalism
& Strive for
excellence

Environmental
efforts

Social
organizations
Community
Services

INTERNAL BUSINESS PROCESS

Remai
ns inn

ovative

It follows its core competencies and the values

Encourages the workplace by enhancing the individuality of the
staff and employees

BUSINESS STRATEGY
Expansion of Programs and Facilities
Encourage Participation
Encouraging partners also to innovate continuously
Early Selection of Talent System
Whistle Blower Policy

Marketing and Advertising

Leveraging TATA Brand

Disruptive Innovation
Fulfilling the Mission Statement
Innovating continuously
Thinking out of the box

BALANCED SCORECARD

THE BALANCED
Internal Business SCORECARD

Learning &
Growth

Process

Catch
them
Young

Reward
professional
ism &
Strive for
excellence

Promote
Entreprene
urship

Promote
Individuality

Learning
&
Growth

Understand
customer
segments

Business
Efficiency

Customer

Expect
More Pay
Less

Financial

Annual
EPS
Growth
Revenue
Growth

Increase
customer
confidence

Effective
Leadership

PORTERS FIVE FORCES

BARGAINING POWER OF SUPPLIERS: LOW

High competition among suppliers
Diverse distribution channel
Low cost of switching suppliers
Volume is critical to suppliers
BARGAINING POWER OF CUSTOMERS: HIGH
Target segment : Growing middle class in
India
Highly informed customers: Information in
Internet affect buying decisions
Reduced life cycle of products, competitors
offering up to date products faster
Availability of more number of options to
customers

RIVALRY AMONG EXISTING COMPETITORS: HIGH

Large industry size
Fast industry growth rate

THREAT OF SUBSTITUTES: LOW

Public Transport Metro, Railways
Relative performance of substitutes -poor.

THREAT OF NEW ENTRANT: LOW

High capital requirements

Strong distribution network required

Advanced technologies are required
Industry requires economies of scale
Entry barriers are high

VALUE CHAIN & VALUE SYSTEM

Support
Functions

Dealer Network,
Marketing Research
Firms, Vehicle Financing

Transporters, Convoy
Drivers Association

SAP , VCM

Primary
Functions

Inbound
Logistics

Operation

Outbound
Logistics

Marketing

Service

SAP , CRM - DMS

Suppliers,
Contractors

Strategic
Alliances

Regional Warehouses,
Dealer Workshops,
Distributors, TASS

24

HUMAN RESOURCE
HR VISION
Lead and Facilitate continuous change
towards organizational excellence; create a
learning and vibrant organization with high
sense of pride amongst its members

Vast pool of technically competent engineers and managers

Tata Motors having an employee base of 60000
Focus on development of technical capabilities
Tata Motors Academy, Alliance with technical Institutes
Career advancement schemes ESS, FTSS
Tata Business excellence model (TBEM) for human resource
Emphasis on team work and highlighting the fact that competition
was outside the company and not within

HUMAN RESOURCE
Tata Motors can defend against the competitors only if the
workforce is fully engaged in the challenge of creating a
truly superior value proposition for its customers
Sustain that value proposition through everything they do
to manufacture the car and market it through their
advertisement / channel partners / big network of car
dealers
Requires a huge commitment of time and money, over many
years, as they sought a permanent culture change rather
than just a series of improvement events.
26

CORPORATE GOVERNANCE
Definition: The set of
mechanisms used to manage the
relationship among stakeholders
and to determine and control the
strategic direction and
performance of organizations

Our
Employees

Our Core
Principles

Makes sure decisions are effective

and help the company achieve
strategic competitiveness
Has fair, ethical and transparent
governance practices along with
highest standards of
professionalism, honesty,
integrity and ethical behaviour.

Government

Our Communities &

Environment

BUSINESS STRATEGY
Business
Strategy Model

Lowest Cost

Distinctiveness

Broad Market

Cost Leadership

Differentiation

Integrated Cost
Leadership &
Differentiation
Narrow Market
Segments

Focused Cost
Leadership

Focused
Differentiation

TO CREATE.

THE
PREPARATIONS
Proper utilization of assets

Firms
Resources

Revenue
Generating
Potential

Resource
Gaps

Strategy to
best use
the
capabilities

Motivating people to work hard

Selective hiring
Job fitting
Training program
Better working environment

STRATEGY #1 TML EASE (NEW BUSINESS

SEGMENT)

Innovation for
Sale (Leasing)

Commercial

Personal Lease

Fixed term
contract

CAB Lease By
strategic
Partnership

Trucks & Buses

under special
contracting terms

Metro Transport
System with
Alternate source of
energy
(Solar/Electric)

Fixed terms min 1

Year/2 years
Resale of Assets by
True Value
Concept

Encouraging self
employment with very
min investment.
Making Owners who
are consistent in
performance

Tie-up with Major

Construction &
Mining Players.
Entering into
contract with
state/central govt.

Tie-up for
technology
partnership
30

Vehicle Type

Estimated
Qty

Manufactu
ring Cost
()

Cost of

Market

Manufacturing

Selling

(in Cr.)

Price ()

Revenue (
Cr.)

Mini

8000

250000

200

400000

320

Sedan

5000

450000

225

750000

375

Luxury/
SUV

1000

650000

65

1200000

120

Trucks

500

2000000

100

3200000

160

Buses

250

2000000

50

3200000

80

Cars

Vehicle Type

ROCE

Margin

65%

39.3%

Estima

ted Qty

CF1

CF2

CF3

640

1055

CF4

CF5

CF6

CF7

CF8

Mini

8000

120000 112000 104000

96000

88000

Sedan

5000

225000 210000 195000

180000

165000

Luxury
/SUV

1000

360000 336000 312000

288000

264000

Trucks

500

720000 680000 640000

600000

560000 520000

480000

440000

Buses

250

720000 680000 640000

600000

560000 520000

480000

440000

36

33

Cars

Cash Flow in Cr.

298.5

279.2

259.9

240.6

221.3

39

OPERATION
MATRIX
Tata AIG Motor
Insurance

Tata Motors
TML Ease SPV
Salvage
Cost

Concorde
Motors

Direct
Sale

Authorized
Dealers

Direct
Sale

Contract
Sale

Tata Motors
Finance
Limited

Fix Period

Ownership

STRATEGY #2: LEVERAGING PIONEERING IDEAS

Tata Motors has pioneered good ideas but failed to capitalize.
(e.g., Spacious hatch, low cost car, sub 4 meter sedan)
Tata motors can leverage the technological capabilities of
various sister concerns and invest in technical advances
Tata motors has a huge spend on R&D activities which have
resulted in a large amount of patents & IP
Technological Patents leveraging all the knowhow from Tata
group can be offered for industry
Take advantage of Intra group IP and offer patents for royalty

LEVERAGING PIONEERING IDEAS

CORPORATE ADVANTAGES FROM DIVERSIFIED

BUSINESS
SHARING OF SKILLS /RESOURCE /CORE
COMPETENCE

Tata
Steel

Tata
Cummins

TCS

TATA MOTORS

TAML

TACO

S.W.O.T ANALYSIS
Strengths

No additional investments
Already available R&D knowhow
Highly synergetic technical
businesses already available in
group
Already high interaction with
Technological leaders
Highly regarded brand in
developing economies
Cash rich parent company

Opportunity

Opportunistic startups in growing

economies do not have big R&Ds
Tata motors can leverage their own
technologies rather than depend on
other manufacturers
Have first mover advantage in
technology and also generate
royalties.

Weaknesses

Tata motors has brand image of

utilitarian manufacturer
Tata motors is not perceived as
technological leader

Threats

Other homegrown manufacturers

like M&M leveraging their
inorganic growth in Technological
service space
Brain drain out of India could affect
future growth

HAMBRICK DIAMOND
Arena
Developing economies
Target Startups and new
organizations not able to afford
R&D

Staging
Operations out of India
and other developing
economies
Wait and watch in
expansion

Economic Logic
Low cost by
leveraging internal
capabilities
Using existing
infrastructures in
developing
economies

Differentiators
Highest value for money
proposition

Vehicles
Internal development
Usage of Intra group IP

KEY SUCCESS FACTORS

Quality -Intense product focus, Consistent quality of service
Innovation
Channel Reach - Distribution channel, Service Network
Brand image - Product Reliability
Variety of products - Enriched customer purchase experience
Promotion
Product attributes -Focus on world-class manufacturing
practices

THANK YOU

ALL SAID AND DONEA NEW STRATEGY

IS REQUIRED