L&T-MEP Group-9 Capstone 08052016

8/17/2019 L&T-MEP Group-9 Capstone 08052016

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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

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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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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…

L&T-MEP Group-9 Capstone 08052016

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Transcript of L&T-MEP Group-9 Capstone 08052016