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CAPSTONE CASE
TATA MOTORS: BECOMING A GAME
CHANGER
Karthik T
Nasarvali Shaik
Rohit Joshi
Rohit Ramachandran
Samaresh Paikara
MEP - 6, Group # 9
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TATA MOTORS “WHERE WE STAND NOW”
New leadership under Guenter Butschek who replaces the late KarlSlym
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 andmarketing rampage & inching towards Tata*
Jaguar Land Rover growing internationally but affected by glut inChinese market. Domestic sales lagging.
* As on April 2016, Mahindra has overtaken Tata motors in sales of sub 3.5 tonne !s
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Strategic
Structure
HumanResources
Operations
Financial
Performance
CAPSTONES
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ORGANISATION DESIGN
What bonds the stakeholders
SENSE OFMISSION
MISSION
STRATEGY
CULTURE ACHIEVEMENTS
VALUES
STAKEHOLDERS
SENSE OFMISSION
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VISION-MISSION STATEMENT
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ORGANISATION STRUCTURE
Organisation bounded by mission and culture
Business is divided into several categories- Commercial vehicles,passenger cars, spare parts and accessories and financing forcustomers
The organization has adapted matrix structure to handle itsmultinational operations
Operational structure is hierarchical but somewhat flat, it helps themin easy interaction between various level in structure which improvessharing of knowledge and ideas within Organization
The open structure of company prevents any singular stakeholdershaving dominant influence
A notion of Power Equilibrium between stakeholders fostered via anopen organisation structure
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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 whichwould affect the company and help them to think as everyone is part of thecompany
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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) andKey Performance Measures (KPM)
Invented and followed Enterprise Process Model
• Helped to entail the process in more clarified way in terms of roleand responsibilities
• Helped company to work as a team
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MEASURE OF EFFECTIVENESS-INNOVATION
Disruptive innovation
Innovate to attain vision of becoming a leading manufacturer andreduce 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, controlstheir individual influence
There is a strong sense of Mission, guiding overall strategy
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BALANCED SCORECARD
Financial Customer
Learning &Growth
Internal
BusinessProcesses
Business Strategy
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FINANCIAL PERSPECTIVE (CONSOLIDATED)
2011
Rev=₹1221(bn)
PAT=₹92.97(bn)
EPS= -₹
Div=200%
2012
Rev=₹1656(bn)
PAT=₹135.16(bn)
EPS= 42.58₹
Div=200%
2013
Rev=₹1887(bn)
PAT=₹98.92(bn)
EPS= 31.02₹
Div=100%
2014
Rev=₹2366(bn)
PAT=₹139.91(bn)
EPS= 43.41₹
Div=100%
2015
Rev=₹2663(bn)
PAT=₹139.86(bn)
EPS= 43.44₹
Div= 0%
NOTE: *TATA MOTORS SPLIT ITS SHARE IN 2011 IN 1:5 RATIO
Tata Motors struggling to maintain their average earnings pershare overtime, even after demonstrating effective leadershipand corporate governance.
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FINANCIAL PERSPECTIVE (STANDALONE)
2011
Rev=₹509(bn)
PBT=₹21.97(bn)
EPS= 6.06₹
Div =200%
2012
Rev=₹589(bn)
PBT=₹13.41(bn)
EPS= 3.90₹
Div=200%
2013
Rev=₹489(bn)
PBT=₹1.75(bn)
EPS= 0.93₹
Div=100%
2014
Rev=₹373(bn)
PBT=₹(10.26)(bn)
EPS= 1.03₹
Div=100%
2015
Rev=₹391(bn)
PBT=₹(39.75)(bn)
EPS=₹(14.72)
Div=0%
NOTE: TATA MOTORS SPLIT ITS SHARE IN 2011 IN 1:5 RATIO
Tata Motors struggling to maintain their average earnings pershare overtime, even after demonstrating effective leadershipand corporate governance.
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DECLINE IN INCOME AND MARKET SHARE
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FINANCIAL PERSPECTIVE
Assessment:Cash is the real asset that firms generate. FCF gives a much clearer view ofthe ability to generate profits. Tata Motors’ FCF has been fluctuating in thetrend where cash flows from operating activities is increasing but capitalexpenditure is sometimes more than that. This is resulting in negative FCF insome 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
2011 2012 2013 2014 2015Net Operating Cash Flow (in
billion $)91.83161.73182.12306.74296.54
Capital Expenditure (in billion $) 81.24138.76187.57269.75316.14
Avg. Dollar Rate 45 50 55 60 65
Free Cash Flow* (in billion )₹ 476.551148.5-299.752219.4 -1274
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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 world’s 4th biggest truck producer, it is
also world’s second biggest bus producer.
" At your door step
Dealership, Sales and Service Access: The Company’s
dealership, sales, services and spare parts network
comprises over 3500 touch points.
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CONSUMER PERSPECTIVE
Strategic Objectives
Gaining Customer
Loyalty
" Occasional Event for targeted loyalcustomers.
"Tata Delight : exclusive loyalty program that offers
great benefits, special privileges and fabulous rewards"Key accountcustomers and small commercial
vehicle customers can also avail benefits like
discounted service & repair bills at Tata Motors
CustomerService
" 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 andcustomers, providing vital inputs to product
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LEARNING & GROWTH PERSPECTIVE
Rewardprofessionalism& Strive forexcellence
Catch them youngand provideresponsibilities
(ESS)
Socialorganizations
CommunityServices
Environmentalefforts
Education & Arts
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INTERNAL BUSINESS PROCESS
It follows its core competencies and the values
Encourages the workplace by enhancing the individuality of the
staff and employees
Remains innovative
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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
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THE BALANCED SCORECARDLearning &
Growth
Internal Business
ProcessCustomer Financial
Catchthem
Young
Reward
professional
ism &
Strive for
excellence
Promote
Individualit
!nderstand
customer
segments
"#xpect
$ore PaLess%
Increase
customerconfidence
nnual
#PS
Growth
#ffective
Leadership
Promote
#ntreprene
urship
Business
#fficienc
Revenue
GrowthLearning
&
Growth
BALANCED SCORECARD
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PORTER’S FIVE FORCES
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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 inIndia
Highly informed customers: Information inInternet affect buying decisions
Reduced life cycle of products, competitorsoffering up to date products faster
Availability of more number of options tocustomers
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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: LOWHigh capital requirements
Strong distribution network required
Advanced technologies are required
Industry requires economies of scale
Entry barriers are high
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PrimaryFunctions
VALUE CHAIN & VALUE SYSTEM
Suppliers,
Contractors
SAP , VCM
SAP , CRM - DMS
Strategic
Alliances
Transporters, Convoy
Drivers Association
Dealer Network,
Marketing ResearchFirms, Vehicle Financing
Regional Warehouses,
Dealer Workshops,
Distributors, TASS
24
InboundLogistics Operation OutboundLogistics Marketing Service
Support
Functions
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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
HR VISION
Lead and Facilitate continuous change
towards organizational excellence; create alearning and vibrant organization with highsense of pride amongst its members
HUMAN RESOURCE
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Tata Motors can defend against the competitors only if theworkforce is fully engaged in the challenge of creating atruly superior value proposition for its customers
Sustain that value proposition through everything they doto manufacture the car and market it through theiradvertisement / channel partners / big network of cardealers
Requires a huge commitment of time and money, over manyyears, as they sought a permanent culture change ratherthan just a series of improvement events.
!
HUMAN RESOURCE
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CORPORATE GOVERNANCE
Our CorePrinciples
OurEmployees
Definition: “The set of
mechanisms used to manage therelationship among stakeholdersand to determine and control thestrategic direction andperformance of organizations”
Makes sure decisions are effectiveand help the company achievestrategic competitiveness
Has fair, ethical and transparentgovernance practices along withhighest standards ofprofessionalism, honesty,integrity and ethical behaviour. Our Communities &
Environment
Government
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BUSINESS STRATEGY
Business
Strategy Model Lowest Cost Distinctiveness
Broad Market Cost Leadership Differentiation
Narrow Market
SegmentsFocused Cost
Leadership
Focused
Differentiation
Integrated Cost
Leadership &
Differentiation
THE
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TO CREATE….
Firm’sResources
RevenueGeneratingPotential
Strategy tobest usethe
capabilities
ResourceGaps
THE
PREPARATIONS…
Proper utilization of assets
Motivating people to work hard
Selective hiring
Job fitting
Training program
Better working environment
–
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30
Innovation forSale (Leasing)
Personal Lease
Fixed termcontract
Fixed terms min 1 Year/2 years
Resale of Assets byTrue ValueConcept
Commercial
CAB Lease BystrategicPartnership
Encouraging selfemployment with verymin investment.
Making Owners whoare consistent inperformance
Trucks & Busesunder special
contracting terms
Tie-up with MajorConstruction &Mining Players.Entering intocontract with
state/central govt.
Metro TransportSystem with
Alternate source ofenergy
(Solar/Electric)
Tie-up fortechnologypartnership
–SEGMENT)
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Vehicle TypeEstimated
Qty
Manufactu
ring Cost
()"
Cost of
Manufacturing
(in Cr.)"
Market
Selling
Price (₹)
Revenue ("
Cr.)
Cars
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
640 1055
Vehicle TypeEstima
ted QtyCF1 CF2 CF3 CF4 CF5 CF6 CF7 CF8
Cars
Mini 8000 120000 112000 104000 96000 88000
Sedan 5000 225000 210000 195000 180000 165000Luxury
/SUV1000 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
Cash Flow in Cr. 298.5 279.2 259.9 240.6 221.3 39 36 33
ROCE Margin
65% 39.3%
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Tata Motors
Tata AIG MotorInsurance
TML Ease -
SPV Tata MotorsFinanceLimited
ConcordeMotors
AuthorizedDealers
DirectSale
DirectSale Contract
Sale
Fix Period
Ownership
SalvageCost
MATRIX
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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 ofvarious sister concerns and invest in technical advances
Tata motors has a huge spend on R&D activities which haveresulted 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
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LEVERAGING PIONEERING IDEAS
BUSINESS
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BUSINESSSHARING OF SKILLS /RESOURCE /CORE
COMPETENCE
TATA MOTORS
TataSteel
TataCummins
TACOTAML
TCS
SWOTANALYSIS
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StrengthsNo additional investments
Already available R&D knowhow
Highly synergetic technicalbusinesses already available in
group
Already high interaction withTechnological leaders
Highly regarded brand indeveloping economies
Cash rich parent company
WeaknessesTata motors has brand image ofutilitarian manufacturer
Tata motors is not perceived astechnological leader
OpportunityOpportunistic startups in growingeconomies do not have big R&Ds
Tata motors can leverage their owntechnologies rather than depend on
other manufacturers
Have first mover advantage intechnology and also generate
royalties.
ThreatsOther homegrown manufacturers
like M&M leveraging theirinorganic growth in Technologicalservice space
Brain drain out of India could affectfuture growth
S.W.O.T ANALYSIS
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HAMBRICK DIAMOND
Economic Logic
Low cost byleveraging internalcapabilities
Using existinginfrastructures indeveloping
economies
Arena
Developing economies
Target Startups and neworganizations not able to affordR&D
Vehicles
Internal development
Usage of Intra group IP
Differentiators
Highest value for moneyproposition
Staging
Operations out of Indiaand other developing
economies
Wait and watch inexpansion
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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 manufacturingpractices
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THANK YOU
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ALL SAID AND DONE…A NEW STRATEGY
IS REQUIRED…
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