international marketing strategy(国际市场策略）

international marketing strategy(国际市场策略）

罗卓英

广州市涉外经济职业技术学院

Tata Nano is the result of efforts by Tata Motors to develop an affordable car that would appeal to Indian motorcycle drivers. The low price of approximately 2000 US dollars at launch draws a lot of media attention, both national and abroad, to the introduction of the Nano. According to Tata Motors, the low purchasing price of Tata Nano is the result of a combination of the reduction of the amount of steel used in construction, the distribution of most nonessential features, and the low Indian labor cost. Tata Motors sets target for this auto not only within the Indian automobile market but also expanding to the international automobile markets, especially those of developing countries. This paper aims to investigate the international market opportunities for the Tata Nano, and to introduce a plan to help Tata Nano penetrate automobile markets worldwide.

1. Screening Criteria

First of all, Tata Motors should take into consideration each market’s attributes that would give clues to the quantity and nature of its product-specific demand and reveal any difficulties of that market that will face the organization. The most important factor of market attributes is the potential customer aspects that include customer needs, segment population sizes, and intrinsic adoption rates. It is essential to look at customer needs because a product like Tata Nano is specifically targeted at motorcycle drives who have low income and still wish to switch to cars. Therefore, it would be wiser for Tata Motors to look at developing countries, in which the number of car purchase is still increasing, unlike developed countries where almost every consumer owns a car. In addition, Tata Motors should also notice the maximum possible size of sales, operations and profits in the international market that it wishes to enter. It would not be wise for the company to consider a market in which average salary falls too far below the purchasing price of Tata Nano because most people would not be able to afford it. Furthermore, Tata Motors should also look at not only what people in a specific market need, but how likely they are to adopt a new product. A market with high adoption rate and openness to foreign products would be advantageous for Tata Motors to introduce its Tata Nano.

Another major aspect of country attractiveness that Tata Motors should pay attention to is the level of competition and substitutes existing in a market. These factors are important because they affect the company’s ability to not only enter the market smoothly, but also to set the price and achieve a considerable customer base. In this case, it would be advisable for Tata Motors to screen for countries in which it possesses the first mover advantage, faces few barriers to entry and exit, and has the power to influence demand in the automobile industry. Ideally, Tata Motors should seek competitive industry markets with low entry barriers and little competition, and then monopolize the market by its unique Tata Nano to prevent further entering and be able to set a profitable price for the company.

Beside competitive, segment and consumer matters, there are other environmental factors that will generate considerable influence upon the introduction of Tata Nano in a new market. Economic influence, which includes level of wealth and infrastructure, is able to indicate to a firm that some markets are more desirable than others. Tata Motors should carefully choose an economic environment whose tax levels, availability of infrastructure, range of promotional options…best benefits the introduction and development of Tata Nano. In addition, Tata Motors also seek political attractiveness of each marketplace. There are a variety of political factors whose effects will determine the success of introducing Tata Nano to the market: government stability, attitude toward foreign firms, influence upon markets and efficiency of the bureaucracy. Finally, it is also crucial for Tata Nano to consider cultural aspects such as the market’s religion, tolerance towards foreign products and business practices. It is better for Tata Motors to choose markets with low cultural distance between India and the market so that it has to faces fewer difficulties when trying to adapt to the new market.

2. List of potential country markets

It is essential to declare from the onset that Tata Nano is not for developed countries with mature automotive industry controlled by large brands. As a cheaply produced and priced car, Tata Nano does not possess good safety rating (Able, 2014). Therefore, markets with high priority for vehicle safety such as the United States and Germany will not accept a car such as Tata Nano, which does not even have an airbag and thus is very unlikely meant for driving on highways (Able, 2014). Therefore, it is wiser for Tata Motors to target markets in which the majority of people drive motorbikes, which in any means cannot be safer than driving a Tata Nano. In addition, because of its dubious ability to drive on highways, Tata Nano may be not created for markets in developed countries where people use cars mainly on highways.

In addition, the fact that policymakers in the developing world oppose to large-scale finished vehicle imports means that local market size dictates the potential for a product such as Tata Nano (Sturgeon and Van Biesebroeck, 2010). Furthermore, countries with closer cultural distance to India such as Middle Eastern and South East Asian countries would be a good choice for Tata Motors to do its business. Those countries are also close enough for easier and timelier supply within regional trading blocs to cut cost of production and keep the low price of Tata Nano. However, the nature of limited regional integration in the case of the Association of Southeast Asian Nations causes Tata Motors to carefully pick its country to target. For example, Malaysia and Indonesia, in particular, adopt policies of promoting their national auto industries with degree of local ownership (Humphrey and Memedovic, 2003). Therefore, a foreign product such as Tata Nano may not make good profits in those two countries, despite its close cultural distance to India.

In terms of economic attractiveness, fortunately there has been a shift of automotive production to developing countries, where sales growth is strongest (Sturgeon and Biesebroeck, 2011). In 2007, total vehicle production levels and growth of Asian countries such as Thailand and India only come behind those of developed countries such as Russia, USA, and Canada (Sturgeon and Biesebroeck, 2011). Regarding taxation policies, Tata Motors should look out for countries with taxation policies that help shift demand towards small and cheaper vehicles. One example of a market with such tax policy is Brazil. Another example is Thailand whose favorable taxation creates a market dominated by light pick-up vehicles (Humphrey and Memedovic, 2003).

Especially, considerable attention should be given to mid-sized developing countries that are large and rich enough to support the assembly of vehicles without modification. In the Association of Southeast Asian Nations and in East Asia more generally, their proximity to large existing markets, such as that of China and India, helps cut the cost and retain the cheap price of Tata Nano being exported to those countries from India (Sturgeon and Biesebroeck, 2011). Thanks to this geographic shift of the industry from developed countries to emerging markets, the production and sales of automobiles have seen a lot of growth in developing countries.

To sum up, based on the aforementioned screening criteria, it is advisable for Tata Motors to introduce its Tata Nano to the automotive markets in developing countries, specifically those in Asia. The potential markets are those of South Asia and Southeast Asia such as Thailand, Vietnam, Malaysia, Nepal, Bangladesh, and Philippines.

3. Fine-grained screening criteria

Positioned as the most affordable car for families belonging to middle class segment, Tata Nano should find a market in which it can embrace its strengths and take advantage of opportunities as well as minimize its weaknesses and avoid threats in order to achieve the highest sales potential.

Tata Nano’s major strength lies in its affordable purchasing price as well as low maintenance and handling cost. When it was first introduced, it immediately became well known in the global automobile industry as being the people’s car. Therefore, Tata Nano would easily enter markets in which the majority of population is middle class who would be glad to choose Tata Nano over a motorcycle thanks to the low price. In addition, since the infrastructure in most Asian countries does not reach the level similar to that of developed countries, it is critical for a car to be able to drive in traffic conditions and poor roads. Tata Nano’s design and good fuel efficiency all help itself become the top choice in customer’s list, especially for consumers in Asia who have to endure congested traffic conditions and poor roads that make them often have to opt for motorbikes (Tata Motors, 2013). However, the infrastructure of Tata Nano’s target country should still be sufficient to support a car like Tata Nano. Arguable, a country with a lot of countryside roads under poor conditions would face difficulties sustaining the performance and safety standards of Tata Nano.

Despite the fact that it is the most affordable car, in order to achieve the best potential of sales, Tata Nano should not target market with a population of too little wealth. Instead, it should look out for a developing country with increasing per capita income and possessing the purchase capability of a good potential customer base. In addition, a potential country for the introduction of Tata Nano should also have an emerging market for the public passenger car segment and a customer base consisting of inpiduals who are willing to convert from a two-wheeler to a four-wheeler.

Being the product’s major strength factor, price is simultaneously considered a weakness for Tata Nano since due to its low price, Tata Nano is generally perceived as a cheap product and thus cannot convey the consumer’s status (The Economist, 2013). As a result, in order to gain good market share, Tata Motors should look for markets in which owning a car is good enough a status indicator, the market with very poor population, or one in which almost everyone owns a car as a daily means of transportation. Most of the threats that Tata Motors has to face come from competition from other automobile producers, especially the big brands, who are capable of producing competitive products at equal or lesser price and/or possessing more appealing innovations. Therefore, it would be ideal for Tata Motors to find a market in which products of big automobile giants are still regarded as luxury cars and to create more intensive promotions for Tata Nano.

To conclude, it is clear that Tata Motors can use the Uppsala model for the entrance of its Tata Nano to foreign markets, by gaining experience from the domestic market, starting their foreign operations from culturally and geographically close countries, and using traditional exports.

4. One country market

Given the aforementioned preliminary and fine-grained screening criteria, I propose Thailand as the country that Tata Motors should introduce its Tata Nano when the company decides to expand its international presence worldwide, especially in the Asian market.

With a GDP of 366 billion US dollars and population of 66.79 million (World Bank, 2012), Thailand has an upper middle income. In 2012, Thailand became the biggest car market in South East Asia with 1.44 million vehicles (The Economist, 2013). The rise of Thailand’s car industry is a result of relaxing regulation in the sector by the government, the low corporate tax rate, and Thailand’s Board of Investment generous incentives to produce eco-friendly cars (The Economist, 2013). In addition, Thailand is also a place were car makers assemble their products and local companies produce parts. Thailand exports parts worth approximately 5 billion dollars, more than other members of the Association of South East Asian Nations combined (The Economist, 2013).

As a consequence, it is clear that Thailand’s fast developing car industry is a very potential market for Tata Motors to introduce its Tata Nano and make the best sales out of this unique product. On almost all important metrics—income of the population, tax incentives, labor cost, infrastructure and business environment—Thailand beats any other Asian countries to become a potential market for Tata Nano to achieve a good customer base and increasing sales.

5. Market entry Strategy

In this case of Tata Motors and its product, Tata Nano, I suggest the company use hierarchical strategy as its market entry strategy into the Thai automobile market because the company commits to the host country, where there is relatively low risk for new entrants, and the product is in the growth stage of its product life cycle.

Most importantly, it is a key for Tata Motors to hold a high degree of control over its product. Since the company always faces competition from various domestic and foreign automotive manufacturers, it is critical for the growth of the company that it sustains its competitive advantage by taking full control of any innovations (Tata Motors, 2013). In addition, because of the low price of Tata Nano, the company should have full control of its production, ranging from guarding its innovative engineering profile from competitors for fear of the emergence of comparable cheap automobiles, to keeping the labor cost low to maintain a competitive price. As a result, it is obvious that a hierarchical strategy would give Tata Motors a full degree of control over the promotion and distribution of Tata Nano in the new market and help the company protect its commercially important information.

Furthermore, as the host market with relatively low-risk, Thailand deserves full commitment from Tata Motors. As the South East Asia’s largest and most advanced automotive industry, Thailand’s automotive industry is well on its way to establishing its status as the Detroit of Asia (The Economist, 2013). Especially, Tata Motors has already paved its ways into and tested the market by its setting up a pick-up truck manufacturing plant in Thailand currently (Nag, Banerjee and Chatterjee, 2007). The Free Trade Area (FTA) treaties along with Thailand Automotive Industry (TAI) billions of dollars plan to further develop the sector make it almost a risk free market for auto players to explore manufacturing and selling opportunities in this country (Nag, Banerjee and Chatterjee, 2007). Most fortunately, government is willing to provide opportunities to new entrants and ready for another round of investment in the automobile sector (Nag, Banerjee and Chatterjee, 2007). Therefore, it is clear that a hierarchical strategy for the introduction of Tata Nano into the Thai market would be optimal because Tata Motors must have the intention of committing to the Thailand automotive market since it already established its manufacturing plant there, and the relatively low risk characteristic of this market is very favorable to new entrants such as Tata Motors and its Tata Nano.

The last factor that determines the fitness of the hierarchical strategy for entering a new market of the Tata Nano is the fact that it is in the growth stage of the Product Life Cycle. Although Tata Motors is struggling since the company reported a 28% drop in sales in 2013, the company relies on its Tata Nano to spur Nano’s sales by volume to grow by as much as 25% (Raj, 2013). Thus, it appears that the Tata Nano is still in the growth stage so that the company can rely on its sales to gain back its lost market share by the end of the next fiscal year (Raj, 2013). As a result, a hierarchical strategy would be best for Tata Motors to introduce its Tata Nano to Thailand market.

6. Online-marketing program

Tata Motors should make sure that no matter which foreign market it enters, Tata Nano has to retain the standards that the company sets for its car and communicate those standards clearly to the consumer through its website that introduces the car. The most important standard that Tata Motors needs to highlight is the fact that despite its low price, Tata Nano still meets European emission standards. Then come other factors such as an automatic-manual transmission, the F-Tronic gearbox, low kerb weight, standard fuel storage capacity, and MPFI fuel injection system (CarDekho, 2014). The company should make sure that the consumer gets these basic pieces of information when looking up Tata Nano because the cheap price of this product may raise a lot of question about its standards.

On the other hand, it is essential for Tata Motors not to neglect to adopt some adaptation in order to fully integrate into the new market. Given the fact that Tata Nano targets small families of the middle class, it would be a good idea for the company to advertise this product on e-newspaper. Adults often spend a significant amount of time online to read newspaper. Therefore, it would be a better option to advertise Tata Nano in online newspaper rather than any social media networks such as Facebook or Twitter because these networks often receive more attention from the younger generation.

In addition, because the Thai people possess significant reverence towards the Royal Family, it may be a good idea for the company to ask for permission of the Royal Family to use their online images or words to advance Tata Nano’s online marketing campaign. If successful, the link that Tata Motors can draw between the company and the preference coming from the Royal family would make its product appear friendlier to the Thai consumers and give it more credentials for them to trust a new foreign car like Tata Nano.

Reference:

Able, V. (2014). Tata Nano: the car that was just too cheap.

theguardian.com. [online] Available at: http://www.theguardian.com/commentisfree/2014/feb/03/tata-nano-car-cheap-poor-safety-rating [Accessed 20 May. 2014].

CarDekho, (2014). Tata Nano - Price, Review, Pics, Specs & Mileage (CNG, Petrol) in India | CarDekho. [online] Available at: http://www.cardekho.com/carmodels/Tata/Tata_Nano [Accessed 20 May. 2014].

Humphrey, J. and Memedovic, O. (2003). THE GLOBAL AUTOMOTIVE INDUSTRY VALUE CHAIN: What Prospects for Upgrading by Developing Countries. sectoral studies series. Vienna: UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION.

Nag, B., Banerjee, S. and Chatterjee, R. (2007). Changing features of the automobile industry in Asia: Comparison of production, trade and market structure in selected countries. Asia-Pacific Research and training network on Trade, Working paper series, (37).

Raj, A. (2013). Tata Motors aims to reclaim market share with Nano diesel. Livemint.com. [online] Available at: http://www.livemint.com/Industry/32KsYUAmyXuvTQZVNpKkWI/Tata-Motors-aims-to-reclaim-market-share-with-Nano-diesel.html [Accessed 20 May. 2014].

Sturgeon, Timothy J and Johannes Van Biesebroeck (2010), “Effects of the Crisis on the Automotive Industry in Developing Countries: A Global Value Chain Perspective”, Policy Research Working Paper 5330, World Bank.

Tata Motors, (2013). 68th Annual Report 2012-2013.

Thailand's booming car industry Detroit of the East. (2013). The Economist. [online] Available at: http://www.economist.com/blogs/schumpeter/2013/04/thailands-booming-car-industry [Accessed 20 May. 2014].

World Bank, (2014). Thailand Data.

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