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    6/10/2009

    IBUS 357 | Sasha Oness, Myrosha Daley, Cecile Wong

    MARKET ENTRY STRATEGIES

    FOR MEXICO

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    Table of Contents

    Executive Summary ......................................................................................................................... 3

    Target Market ................................................................................................................................. 4

    Uncontrollable Environments ......................................................................................................... 4

    Political and Government Factors........................................................................................... 4

    Economy .................................................................................................................................. 4

    Labour ..................................................................................................................................... 5

    Competition ............................................................................................................................ 5

    Product ............................................................................................................................................ 5

    Product-Adaption Decision Factors ........................................................................................ 6

    Entry Mode ..................................................................................................................................... 7

    Internal and External Factors .................................................................................................. 7

    Industry and Competition ....................................................................................................... 8

    Marketing Mix ................................................................................................................................. 9

    Product and Promotion .......................................................................................................... 9

    Product Positioning Chart ..................................................................................................... 10

    Price .............................................................................................................................................. 10

    Place and Distribution ................................................................................................................... 10

    Bibliography .................................................................................................................................. 12

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    Executive Summary

    Tata Motors of India has introduced the Tata Nano; a new breed of 21st

    century cars that is a

    smaller, lighter, affordable, rear-engine, 4-passenger, fuel efficient car. We intend to market

    the Nano to the Mexican middle class which is rising and booming very rapidly. Multiparty

    elections has made the political and economic factors of Mexico much more stable, and along

    with new free trade agreements, this market is one to watch.

    In order to take advantage of economies of scale we intend to standardize and use dual

    adaption for the product and promotion. Branding the car is simple the Tata Poco will create

    loyalty and will help to differentiate ourselves from international competition it will hit home

    with our consumers. We will focus on a hierarchical form of entry mode and will make use of

    sales and production subsidiaries with R&D in the home country and marketing efforts in the

    host country; creating better ownership, avoidance of tariffs and shipping costs.

    To promote the Poco we will focus on 2 key attributes: strong family values and a passion for

    soccer, along with incentives for consumers such as the Tatalana lana, cash, back into

    consumer hands. Pricing for the Poco will take two forms: price penetration and low cost in

    order to be highly competitive in the market. To distribute the Poco we will build Trial and

    Order centers where consumers can drive and place an order for a Poco. The JIT strategy will

    enable us to take advantage of intensive market coverage through our unique distribution

    model.

    Additionally, we believe Mexico will become our Lead Country for future expansion into the

    Americas. Tata will adopt a polycentric orientation recognizing that Mexico is socio-culturally

    unique in order to best exploit our advantage.

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    Target Market

    Targeting the Mexican middle class. The class is rising and booming very rapidly. The middle class is defined as $7,000-$50,000 a year. The number has risen to 10

    million families. The percentage has risen to almost 40% opposed to 30% of Mexican

    households.

    The reason why we are targeting Mexican middle class is because wages have gone up,women are having fewer children, and more of them are joining the workforce.

    Uncontrollable Environments

    Political and Government Factors

    Their political and government factors are much more stable due largely to thesuccessful transition from a single party rule to multiparty elections.

    Mexico has signed several free trade agreements with Japan and the European Union,an agreement that the US doesnt have, which gives them an advantage.

    Mexico already has a free trade agreement with North America as well.Economy

    Mexicos economy has been on a steady rise over the past decades, mainly because ofother American car manufacturers in Mexico.

    This has helped the middle class more prominent because of higher wages. Mexico has grown to become the worlds 14th largest country with a GDP of $840, 012

    in 2006.

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    However with the recent recession, Mexican stock markets are dropped 35%. The Pesohas depreciated by 40% since March 2008.

    Labour

    There is already a skilled labour force with the automotive industry, with Fordsmanufacturing plant.

    Competition

    Not a direct competition, however it is a threat. Another form of personal motorizedtransportation would be scooters.

    Product

    The Nano name will be changed to the Poco which means little in SpanishMexicosdominant language.

    We will be manufacturing the Nano CX variant which is the middle of the 3 variantsbeing produced in India right now. It has all the features of the Nano but includes AC

    which is extremely important to our Mexican Market.

    The steering wheel will be adjusted to the opposite side which is the standard in Mexicoand will not be producing the car in the color yellow for in Mexico yellow means

    mourning and this would negatively affects that particular colors sale.

    We will be standardizing the product along with a dual adaption of product andpromotion (see marketing mix) will adapt the product slightly for our international

    market.

    Because we are integrating into the Mexican Market we are standardizing to takeadvantage of economies of scale and research and development but will hope to gain a

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    balance of standardization and adaption to take advantage of the marketing concept

    and to meet the differing consumer needs.

    Product-Adaption Decision Factors

    Market Characteristics

    The market in Mexico is rising very quickly along with the number of potentialconsumers economic status is in good standing

    Will not be dealing with too many barriers since we are not exporting into the countrybut instead are manufacturing there so government regulations will take effect

    Product Characteristics

    Brand will be focussing on the Tata Poco which our consumers can relate to easily itis identifiable and will differentiate us from competition

    Packaging as mentioned above will be package the Poco as the CX variant and it willcome in White, Blue, Red, and Silver not yellow.

    Company Considerations

    Resources labour will not be an issue since there are numerous engineers andexperienced auto-industry workers in Mexico land is available and inexpensive which

    makes creating a plant there a good option

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    Entry Mode

    Tata will use a Hierarchical Mode to enter the market of Mexico with its product, thePoco and will make use of sales and production subsidiaries. Tata will maintain R&D in

    the home country in order to benefit from economies of scale.

    Marketing efforts for the Poco will take place in the host country. We recognize thatthis choice is higher risk and that we will have to commit more resources.

    The benefits will be better control as well as ownership. In doing this we will avoidtariffs and shipping costs which will offset the additional resource commitment of this

    decision.

    Additionally, we believe Mexico will become our Lead Country (LC) for future expansioninto the Americas. Tata will adopt a polycentric orientation recognizing that Mexico is

    socio-culturally unique in order to best exploit our advantage.

    Internal and External Factors

    As a large scale enterprise Tata will take advantage of its resources when making itsmove to market the Poco in Mexico.

    Capitalize on international experience as we make this move. Socio-cultural distance willnot be considered a deterrent for this effort. The risk of conducting business in this

    country is perceived as low and the market size and potential growth are attractive.

    Recent agreements made between India and Mexico will minimize trade barriers for thisproject and the automobile market is competitive but not so that it is a deterrent for a

    Hierarchical mode of entry.

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    Industry and Competition

    Barriers to entry

    Political barriers to entry are Low Industry barriers are Med Financial cost represents a Higher barrier

    Supplier power

    Supplier power is Med High Parts are specific Few suppliers Power adjusted via contracts and alliances

    Threat of substitutes

    Threat of substitutes is Med Coach bus travel is common in Mexico, however public transit within

    cities can be poor

    Scooters are very common substitute and less expensive, but lackutility/capacity

    Threat of new entrants

    Threat of new entrants is Low Threat of start-ups is low, this is a capital intensive industry

    Competition/Rivalry

    Competition is High, most major auto manufacturers have a presence inMexico

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    Many competitors in a slow growth marketOther market players and comparable products include:

    GM Aveo 167,207 pesos* Toyota Yaris 151,100 pesos Ford Fiesta 123,000 pesos

    VW Pointer 92,060 pesos Nissan Aprio 101,700 pesos

    *All prices listed at Mexican market list price.

    (All models listed are base models. Manual transmission and no A/C)

    Marketing Mix

    Product and Promotion

    Tata will use a dual adaptation of product and promotion. The product modifications made to the product will only be to satisfy regulations

    and consumer expectations of the norm. Any other changes will be kept to a

    minimum to avoid driving up the price, as this is our key competitive advantage.

    Through familiarizing ourselves with the culture of our market we will useeffective communications to hit our target. Key components of our marketing

    messages will include these key attributes:

    1. Strong family values 2. A passion for soccer Additionally we will use innovative and current successful promotions. Tatalana will be a promotion that will put lana, cash, back into hands of purchasers.

    We will offer cash to purchasers as an incentive to buy or finance a Tata Poco. These

    kinds of promotions have proved highly effective in Mexico.

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    Product Positioning Chart

    Price

    For the product of the Poco, Tata will use a combination of pricing strategies. #1: Penetration Pricing. We recognize that we are entering a competitive market with

    established brands.

    To gain market share we will enter with prices below competitors. As we gain market

    share and brand recognition we can raise the price in order to maximize revenues.

    #2: Low Cost. Tata will offer a product similar to its competitors at a lower price. Theinitial price that we will offer the Tata for in Mexico will be 50,000 pesos. This will leave

    us with a very good margin and will be highly competitive in the market.

    Place and Distribution

    Tata will reinvent the conventional auto industry distribution model - build Trial & Ordercentres. Purpose of these centres will be for consumers to test drive and place an order

    for a Poco. These store fronts will simple, small and numerous.

    Ex ensive

    Affordable

    Utility Luxury

    GM Aveo

    Toyota Yaris

    Ford Fiesta

    Nissan Aprio

    VW PointerTata Poco

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    Inventory units will be for customers who cannot wait for the manufacturing delay. Customers will have the choice of model and color. An order will be placed and

    manufacturing will begin.

    Manufacturing delay will be minimal as car is very simple. The cars will be shipped to thecentres, and staff will deliver the car to the customer.

    Cost of labour in Mexico is low, so staffing these centres will be inexpensive. Trial &Order centres will be located in close proximity to banks so that financing will be

    available within walking distance. One in five of these centres will be designed for after-

    sales service.

    Made-to-order strategy because of the simplicity of this car. We will take advantage ofIntensive market coverage through this unique Distribution model.

    Minimize our Channel length, preventing price escalation and preserving ourcompetitive advantage = high level of control over how our brand is managed and

    product is marketed.

    By eliminating the costs associated with maintaining inventory we will preserve ourcompetitive advantage, of price, even further.

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    Bibliography

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    .

    CIA World Factbook. 27 5 2009 .

    Cowen, Tyler. "Facts about the Mexican Middle Class." Marginal Revolution. 11 Mar. 2006. 7

    June 2009

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    Evan R. Hirsh, Louis F. Rodewig, Peter Soliman and Seven B. Wheeler. "Changing Channels In The

    Automotive Indusry." Startegy + Business. 27 5 2009 .

    Ford. 27 5 2009 .

    General Motors/Sitio Corporativo. 27 5 2009 .

    Gunelius, Susan. "Color meanings around the world." Bizzia. 23 Sept. 2007. 07 June 2009

    .

    Hollensen, Svend. Essentials of Global Marketing. Harlow: Prentice Hall, 2008.

    International Labour Costs Comparisons. 20 5 2009 .

    Klepak, Hal. Mexico: Current and Future Political, Economic, and Security Trends. Rep. July

    2008. Canadian Defence and Foreign Affairs Institute. 7 June 2009

    .

    Kotschwar, Barbara. "Our Model Neighbour." Slate. 14 Apr. 2009. New America Foundation. 1

    June 2009 .

    Manufacturing. net - Management News Now. 20 5 2009 .

    Marta, Janet, Christina Heiss and Steven Lurgio. "An Exploratory Comparison of Ethical Perceptions of

    Mexican and U.S. Marketers." Journal of Business Ethics 82.3 (2008): 539-555.

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    Mexico Internet Usage, Population and Telecommunications Reports. 2008. 20 5 2009

    .

    NISSAN MEXICANA. 27 5 2009 .

    "Piggybanks Full of Pesos." Business Week 13 Mar. 2006. Mcgraw Hill Companies. 5 June 2009

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    Ram-Prasad, Chakravarthi. "India's Middle Class Failure." Prospect Magazine Sept. 2007. 2 June

    2009 .

    Tata Nano. 2005. 7 June 2009 .

    "Tata Nano." Wikipedia. 5 June 2009. 7 June 2009 .

    Tejaswi, Reeba Zachariah & Mini Joseph. "India Business." 30 4 2009. Times Of India. 20 5 2009

    .

    Toyota Motors Sales de Mexico. 27 5 2009 .

    "UPDATE: Mexico's April Output Down 47% To 100,421 Units." Wall Street Journal Business. 20 5 2009

    .

    Wentz, Laurel. "Mexico: Sabritas cash promotion." Advertising Age 80.12 (2009): 20 - 20.

    Wolkswagen Mexico. 27 5 2009 .

    Wurst, Erika. "Mexican Middle Class Rising." Crossing Boarders. 8 Dec. 2004. 7 June s2009

    .