Case: Strategy Failure: What went wrong with Tata Nano?
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Science, Technology and Development ISSN : 0950-0707
Case: Strategy Failure: What went wrong with Tata Nano?
Rachita Ota*, Dr. Sushree Sangita Ray**, Pratikshya Panda ***
*Asst Professor, Amity Global Business School, Bhubaneswar,
**Asst Professor, Amity Global Business School, Bhubaneswar,
***Student of MBA, Amity Global Business School, Bhubaneswar
Abstract
Different studies across sectors have revealed that many global brands have failed during the
implementationand execution phasesof theirstrategies, which is crucial for the success of every
business.Gaps in the implementation and planning can be a significant element of these
problems. Most of the failures are usually caused by controlled factors. To have a better
understanding of the factors responsible for these strategic failures, the following case from
automobile industry would be of a great aid. The International Automobile Industry has seen
anabundance of transformation over the years in terms of the technology usage as well as their
design. The present case has attempted to analyze the reasons for the failure of the Tata Nano in
India. Do you think thatTata Nanois a Strategic failure and what acted as an inhibitor for their
success in India?
Key words:Automobiles, Industry, Strategy, Motors
Case study
Tata Nano is a small urban automobile introduced in India and sold by a single-generation
Indian manufacturer, which appealed to existing motorbike riders – at a price of 1, 00,000, or
2,500 USD, on 10 January 2008. Tata Nano is the tiniest rear-engineered hatchback. At its
debut, Tata Motors anticipated 250,000 yearly expected output. This has not been reached, and
many causes have contributed to a decrease in sales volume, including time delays when the
company moved from Singur to Sanand. There were instances where the consumers were
having the feeling that the wagon is dangerous owing to cost reduction. For the 2016-2017
model year, the current sales totalled 7,591.As Cyrus Mistry, former President of Tata Sons,
and Tata Motors, revealed in 2017, this initiative wasted money. As marketing mistakes and a
poor safety record could not attract buyers, Tata has discontinued producing the Nano. Tata
Motors debuted their milestone Nano car brand in 2009, which is the world's cheapest
automobile. This eventually brought the car's appeal to fail as Nano favoured high-end
trademarks by an increasingly brand-conscious Indian middle class. Over the years, safety
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concerns have also increased and demand among lower-income groups has also
deteriorated.Although Indian customers had initially planned for 200 000 Nano vehicles, after
the debut of the car, their sales were significantly below Tata's estimates. The firm only sold
509 Tata Nano cars in November 2010. This amount has dropped to only three in June 2018
prompting the firm to halt manufacturing.
The story behind the making of Tata Nano
Ratan Tata devised the whole concept of the Tata Nano. Ratan Tata spotted a four-membered
family riding a scooter in November 2003. It rained and the family managed and settled on the
two-wheeler somehow. This greatly affected Ratan Tata and triggered him to find a safer
replacement for it. He wanted the country to be moved in a safer way.
"A few years ago today's narrative began when I looked at two-wheelers riding families. The
dad drives a scooter, his small son faces him and his wife is holding a new-born behind him. I
questioned myself if one can think of such a family's secure, cheap, all-weather conveyance."
Tata remarked it during the introduction of the New Delhi Tata Nano.
Specifications ofTata Nano
The capacity of Nano was 624 cc, with a manual gearbox, Single overhead camshaft (SOHC),
petrol, rear and back-drive car that was 25 kilometres per litre very noteworthy. A good 15-17
kilometres per litre of automobile was in the city. The power supply for these 642 cc engines
was 37 horsepower and 51 Nm torque. With a width of 1750 mm and a height of 1652 mm, The
Tata Nano was 3164 mm in length. It provided a respectable 180 mm floor clearance.
Some other specifications were:
• Only one screen wiper is used rather from two
• Removal of airbags at single go
• Provision of a lighter and thinner spare tire
• Make the fuel intake available only via the front hood
• Adding only one wing mirror
This was almost the same as its immediate competitor, the base model of the Maruti Alto 800,
which was also more expensive.The vehicle eventually received a makeover in 2015 and, while
the first iteration did not have a rear hatch, the new one did. It also received a facelift. But, this
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was not enough to draw people back to the Nano and sales kept following a downward trend,
until there simply were none left.
What wentwrongwith the People’s Car?
The vision of Ratan Tata had a dull conclusion at the end. The car's sales never exceeded the
positive level. Ratan Tata was well aware in January 2008 of the sharp rise in steel, pipeline
and other miscellaneous component costs, which may result in an increase in ultimate
automobile pricing. However, because this was a promise he made to the people, he went on
with the initial price of 1 lakh. Few of the reasons are explained below:
• Lack of Practicality
Two-wheelers are nimble little vehicles that let people navigate through traffic easily, while
parking is rarely an issue. The same could not be said about the Nano. So, a major issue with it
was that it was not a motorbike.While it was small, it simply was not small and convenient
enough for people who used motorbikes. That was a major issue in the Nano’s marketability
that the automaker had not even considered.Also, the Nano was more expensive to maintain
than a bike and made car ownership more expensive. The lack of standard features that are
usually expected in such vehicles also made the Nano feel cheaper.Both these differences
compared to bikes could have been overcome with a better and safer design as well as a more
refined look and feel. It simply wasn’t what people wanted to buy. Car sales in this segment
were extremely sensitive to how good a vehicle looks.
• Poor Marketing strategy
The automaker was under the misconception that the low price would be enough to motivate
people to buy the Nano. They did not account for their positioning it as a cheap vehicle which,
in India’s markets, translates to low quality because no one wants a daily driver that looks
cheap and is poorly built.In simple words, those who could afford a higher-end Nano did not
want to drive it.Also, when people are status-conscious, they look for things that make them
look wealthier than their neighbours and colleagues. While a car sounds like it would be an
upgrade from bikes, a cheap one that looks the part will always be shunned and will never be
perceived to boost one’s social status.
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• Emotionally Disconnected Advertising
One of the most challenging aspects of marketing a vehicle like the Nano is advertising. A
basic rule of advertising is to create an emotional connection or a bond with the audience that
makes them want to experience the product. Tata failed to do so with their advertisements for
the Nano.While some TV commercials were fairly good, most of their audiences simply could
not relate to what they were seeing on screen. If the bad positioning was not enough, the fact
that people also could not relate to the advertisements made things a lot worse.
• Poor Build Quality
One of the most significant problems with the Nano was its safety rating. The manufacturer
expected the Nano to receive four stars in the Euro New Car Assessment Program (NCAP)
crash test. But, when AltemeyerDeutscher Automobile-Club (ADAC), a German automobile
club, tested it in 2014, it failed miserably. The Nano lacked airbags and proper adult protection.
It also did not meet basic UN safety requirements and was not as safe as Tata had claimed and
expected it to be.The Nano was also very lightweight which made it a very bad choice for the
usual Indian roads which are not always smooth as silk. That also meant that it felt unsafe to
drive.On top of that, several incidents were reported in which the Nano caught fire for
mysterious reasons. The company claimed the cause was faulty foreign electrical equipment
linked to the exhaust.To make matters worse, they refused to recall the vehicles with defective
equipment and instead extended the warranty period to four years, while offering to replace the
supposedly faulty parts in those already sold. Bad customer service also added to making the
Tata Nano a failure.
• Fictional Public Relations
The automaker’s bad public relations worsened the matters. The company simply ignored this
crucial aspect and, while everyone focused on how many units caught fire, no one talked about
how many were running on the roads just fine. That also convinced the general public that the
Tata car was so cheap because the company cut corners in the manufacturing process.While
this would not have been a major issue on its own, when combined with bad marketing and
advertising, it became one of the biggest reasons for first-time car buyers to avoid the Nano.
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• Production Issues
Another major problem that contributed to the Tata Nano’s failure was the long wait time for
delivery.The Nano was supposed to be manufactured in the new plant in West Bengal.
Unfortunately, the company could not acquire land for the facility and instead had to start
manufacturing from Gujarat.Moreover, the lower production capacity could not keep up with
the initial demand and many people simply did not buy a Nano early on because there were not
available.
Conclusion
The Tata Nano’s failure is a key learning point on how to market and position an automobile as
well as which practices should be avoided. Bad marketing and public relations for a hatchback
that was not well designed and manufactured from the start simply added fuel to the fire. Why
Tata Nano failed serves as a case study for future endeavors.It was a faulty idea to a possibly
promising reality that never transpired.The automaker simply could not deliver what it had
promised and instead gave the people what they did not want: A cheap car that looked and felt
cheap and was unsafe to drive.
The very first assumption that people wanted a cheap vehicle resulted in a cascading effect that
ended with the demise of the Tata Nano.It was simply a car that was too expensive for the
target market, yet too cheap for those who could afford it.Tata Nano should have brought a
revolution. Ratan Tata had an ambitious aim of giving every Indian with a safer way of
mobility. The initiative never failed, though, as did the conditions. Tata showed its generosity
in the lower than ever margins. Perhaps it should never become successful or earn Tata Motors
significant cash. Maybe it was just Tata's will to strive genuinely for the country's
improvement. The Nano has made a difference to the automobile business regardless of the
cause.
References:
• Mitra, R. (n.d.). What about the people in the “people's car”?: Tata Motors Limited and
the nano controversy. Case Studies in Organizational Communication: Ethical
Perspectives and Practices Case Studies in Organizational Communication: Ethical
Perspectives and Practices, 119–128. https://doi.org/10.4135/9781452240572.n9
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• Mukherjee, J. (2021). Tata Nano: Case of repositioning: Case analysis. Vikalpa: The
Journal for Decision Makers, 46(3), 188–190.
https://doi.org/10.1177/02560909211044253
• Raghu, G. (2013). A study on the consumer behavior towards Tata Nano. SSRN
Electronic Journal. https://doi.org/10.2139/ssrn.2340358
• Schuster, T., & Holtbrügge, D. (2011). Tata Nano: The car for the bottom-of-the-
pyramid. Fallstudien Zum Internationalen Management, 83–102.
https://doi.org/10.1007/978-3-8349-6793-0_7
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nano. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2597482
• Tellis, G. J. (2010). Tata Nano: Poor man's car or Radical Innovation? SSRN Electronic
Journal. https://doi.org/10.2139/ssrn.1537473
• "Nano Mania". Autocar India. February 2008. Archived from the original on 27 April
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• https://gomechanic.in/blog/tata-nano-india/
• https://en.wikipedia.org/wiki/Tata_Nano
• "Tata Nano may expand market by 65%: CRISIL- Automobiles-Auto-News By
Industry-News". The Economic Times. 12 January 2008. Retrieved 8 June 2009.
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