BUSINESS MARKETING

Tata Motors: The Tata Ace

Submitted to
Dr. R Sugant
Associate Professor – Marketing
SDMIMD, Mysuru.

Submitted by Group 3
Clifford Prasad 1905
Santhosh Machireddy 1909
Pushkaraj Patil 1912
1st Question: Map the ‘new product development’ process of Tata Ace.

Ans:

Idea Generation (Stage 1):

1. In 2001, when Tata Motors went in a loss of Rs. 5 billion ($111 million), which was due
to cyclical downturn in the commercial-vehicle segment and an economic recession.
2. Tata realized that the smaller commercial vehicle would also be attractive to Tata Motors
in light of the above financial loss, since smaller commercial vehicle demand was
historically less cyclical than that of medium or large vehicles.
3. In order to improve infrastructure Government of India decided to build Golden
Quadrilateral between major cities. As 3 wheelers were not safe on these roads, India
being a largest 3-wheeler market that gave an idea for Tata to launch 4-wheeler vehicle.

Screening and Preliminary Investigation (Stage 2):

1. As part of Screening and Preliminary Investigation, the Tata team met with customers
and interviewed more than 4,000 truck and three-wheeler operators in rural and urban
areas of India as part of its voice-of-the- customer analysis.
2. Tata found that customers were looking for a vehicle that offered the price, fuel
efficiency, and maneuverability of a 3-wheeler but with the safety, durability, additional
payload, and comfort of a 4-wheeled truck.
3. The customers wanted a scaled-down version of Tata’s four-ton 407 truck.
4. The team realized that in addition to the business case, there was a personal motivation
for purchasing this sort of vehicle.

Specifying features (Stage 3):

1. The customers wanted a scaled-down version of Tata’s four-ton 407 truck.

2. The Ace’s core market would be customers looking to transport 750 to 1,500 kilograms
over a distance of 100 to 200 kilometers.
3. Construction of all-weather tertiary roads connecting rural network that could create
paradigm shift in movement of goods, last mile service to transport <2 ton from hub to
consumption centers.

Product Development (Stage 4):

1. Considering Tata Motors’s financial situation, only five people were assigned to the Ace
team on a full- time basis.
2. The Ace team was also the first at Tata Motors to implement cross-functional teams for
product development as well as the first to make extensive use of the production
preparation process (3P).
3. The total development budget was not to exceed Rs. 2.2 billion ($49 million) in order to
 control cost.
4. Using CAD prototyping design was made, semimonocoque body was chosen to
withstand overload.
5. Created two-cylinder engine.
6. The team decided that the Ace should meet the higher M1/N1 class safety norms.
7. 70% parts were outsourced. Through creative design, utilizing existing facilities team
developed Ace within budget.
8. The front windshield was pasted to the steel window frame instead of attached using a
rubber seal so that it could add structural strength.

Product Launch/Commercialization (Stage 6):

1. In order to convince buyers, dealers were educated in the operating-economics analysis

and given examples of how their customers could earn more.
2. The team worked with an Indian advertising agency named Rediffusion DY&R to create
newspaper, television, and wall-painting advertisements for the Ace.
3. A television advertisement was created for the South Indian state of Tamil Nadu in which
people called the Ace “Chinna Annai,” Tamil for “little elephant.”
4. In May 2005, the Ace was launched priced at Rs. 225,000 ($5,000).
5. Product was successful as the company sold its annual production target within a year
and also attracted many.

2nd Question: Discuss the approaches to new product development of Tata Ace.

Ans:

1. Girish Wagh, a 30-year- old engineer was selevcted to head the Ace project team.
2. The Ace team was also the first at Tata Motors to implement cross-functional teams for
product development as well as the first to make extensive use of the production
preparation process (3P).
3. Based on a Japanese manufacturing process, 3P allowed the team to involve stakeholders
(suppliers, customers, marketing team, dealers) at an earlier stage in the development
process and think about all potential ways of completing each step.
4. Considering Tata Motors’s financial situation, only five people were assigned to the Ace
team on a full- time basis.
5. Team ensured strict cost controls for the project.
6. Ace team decided to increase the outsourced content percentage as outsourcing would
allow Tata Motors to convert the fixed cost of production facilities into variable costs,
which would be beneficial in a market downturn.
7. In order to control costs, the team decided to manufacture the Ace at an existing
underutilized Tata Motors plant in the western city of Pune.
8. Design team was guided by Vice President of the Engineering Research Centre, helping
 to rapidly iterate and isolate stress points.
9. Engine design was under the guidance of President of light and Small Commercial
Vehicles and also veteran designers had hands in this project.
10. The project received encouragement, guidance, and support from Ratan Tata, chairman of
the Tata Group. He displayed confidence in the young Ace team and took a personal
interest in product styling, performance benchmarking, and product positioning.

4th Question: Perform a detailed analysis of product and marketing strategy of Tata Ace.

Ans:

Product Strategies:

1. Using CAD prototyping design was made, semimonocoque body was chosen to
withstand overload and to provide the ride quality.
2. Ace would deliver goods at an all-in cost of Rs. 6.70 to transport one ton a distance of
one kilometer compared with Rs. 7.88 for the next-best competitor and a segment
average of Rs. 8.54.
3. Ace team decided to design a product with safety, comfort and aesthetic considerations so
that it should meet the higher M1/N1 class safety norms.
4. The engineering team used crash-test computer simulations and developed a cabin that
met full-frontal-crash requirements while still maintaining a flat-faced stance.
5. Created two-cylinder engine.
6. The front windshield was pasted to the steel window frame instead of attached using a
rubber seal so that it could add structural strength.
7. Tata team met with customers and interviewed more than 4,000 truck and three-wheeler
operators in rural and urban areas of India as part of its voice-of-the- customer analysis.
8. Tata found that customers were looking for a vehicle that offered the price, fuel
efficiency, and maneuverability of a 3-wheeler but with the safety, durability, additional
payload, and comfort of a 4-wheeled truck.
9. The customers wanted a scaled-down version of Tata’s four-ton 407 truck.
10. The team realized that in addition to the business case, there was a personal motivation
for purchasing this sort of vehicle.
Marketing Strategies:

1. Tata targeted the ideal customers and segmented into four groups: performance
sensitive (7%), balanced perspective (25%), return-on-investment (ROI) sensitive
(55%), and acquisition price constrained (13%).
2. The Ace’s core market would be customers looking to transport 750 to 1,500
kilograms over a distance of 100 to 200 kilometers.
3. Tata Ace created a unique value proposition where they understood what they
must offer in order to stand apart from competition.
4. Marketing Mix (4Ps):
o Product: High quality and safety standards and design with semimonocoque
body.
o Price: Ace is priced in comparison with 3 wheelers and rickshaws. Costs were
reduced using outsourced parts.
o Promotion: The team worked with an Indian advertising agency named
Rediffusion DY&R to create newspaper, television, and wall-painting
advertisements for the Ace. It came up with a tag line “Small is Big”. A television
advertisement was created for the South Indian state of Tamil Nadu in which
people called the Ace “Chinna Annai,” Tamil for “little elephant.”
o Place: They have distribution network in cities, small towns and villages. Within
three months, 300 new distribution points were set up in the areas where the Ace
would be launched.