Business Strategies for TATA Motors India on Innovations
Operating in the automobile industry today is profitable, especially for companies that are able to embrace innovation. These include organizations that are in a position to develop their products over time to suit the needs of their clients. Innovations guarantee companies a high competitive advantage that makes their operations more profitable. Due to the competitive advantage, such companies are able to gain a large market share that helps them make more sales and consequently higher profit levels compared to the competing firms. Apart from the large market share, innovations may lead to high profitability due to the low cost of production by the firms. Such firms are able to expand their product line and exploit new markets, thus making more progress than their competitors. Due to the merits associated with innovation, the number of firms that are encouraging employees to be innovative is increasing by the days. The high profits in the automobile industry have attracted many firms, thus intensifying the rate if competition.
Every firm in the industry is striving to win the largest market share, thus making it necessary for companies to implement survival mechanisms that include innovation. Among the companies that has shown great commitment to innovation is TATA Motors India, a fact that has seen it rise to become one of the leading automobile firms in the country and it has a global presence as well. However, the dynamic nature of the business sector today requires companies to be more aggressive in their activities to suit the fast changing customer tastes and preferences. This paper discusses the innovation strategies adopted by TATA Motors India and recommends mechanism that the firm should use to provide cutting-edge products in the market. The recommendations are based on accurate evaluation of the potential problems and the barriers that the company may face in solving the problems. The paper findings may be applied by the company directors to improve the competitive advantage of the company.
Innovation refers to the process of creating a more useful or more appealing product in the market, and most importantly, one that adds value. Although some innovations bring about a completely new product to the market, others involve developing the existing products to make them more appealing. The development may even involve acquisition of a product that already exists in the market and modifying it to suit the needs of the competitors better. One of the companies that has used this tactic is TATA Motors India by purchasing Jaguar and LandRover brands from Ford.Among the success factors for TATA Motors India is its ability to innovate products over time to suit the changing needs of the consumers. The innovations put the company above the competing organizations thus enabling it to be a market leader in the automobile industry. Innovating a product is a difficult task because the company must consider the current as well as the future needs of the company. The challenge faced by most companies is identifying the features that suit the customers’ needs best so as to satisfy them better than the competitors.
The ability of a company to produce an innovative product does not guarantee its success in business, unless the product satisfies the demands of consumers better than the competitors’. It is important for companies to follow a process of innovation to come up with products that meet the current and the future demands of the consumers. Managing innovation entails the application of the three phases involved in the process of generating and introducing a new product in the market. The first phase is the generation of ideas, which may be influenced by the changing needs of the consumers in the market. This is mainly informed by the data gathered from market research concerning customer preferences. The other factors that lead to generation of ideas is the shift in demand and competitors’ actions. Once the ideas have been generated, the second phase involves selecting the most suitable one, based on factors such as the company’s budget and the expected impact on the overall market performance by the company. The selection phase is very sensitive because it determines whether the innovation will be a success or a fail. The final phase in managing the innovation is the actual implementation of the selected idea. In this phase, companies make changes based on the behavior of the environment. The quality and the number of innovation in a company is greatly influenced by the working environment provided. Companies have the capacity to create an enabling environment by encouraging the workforce to think creatively. TATA Motors India is among the companies whose innovations are attributed to its ability to reward creativity, thus encouraging employees to strive towards being more creative.
One of the factors for successis the distinction of the products relative to the available ones in the market. High differentiation creates a brand and image for the product that makes it possible for clients to identify with it. The company must consider customer perception of the product before introducing it to the market as this is the driving force in purchase decision. The other factor that influences the success of an innovation is the positioning strategy used by the company as it dictates the extent to which it reaches the target market. Another factor that influences the success of innovations is the amount of human, physical and financial resources available to develop and implement the innovation. The support of top management is also a success factor in innovation as it influences the coordination and control needed for the innovation to succeed. TATA Motors India has been able to manage its innovation over the years, a factor that explains its success in the highly competitive automobile industry for decades. Here is thebrief historyof the company since its establishment.
Company overview for TATA Motors India
The company was started in 1945 where it was involved in the production of engineering products and manufacture of locomotives. Three years after its establishment, the company introduced a steam road roller that became the most innovative product by the company at the time. The innovation made the company realize the impact of product development and innovation on consumer needs. Fourteen years after its establishment, the company set up a research and development department that was mainly meant to identify the changing customer needs and preferences. Establishing the department was the company’s way of showing its commitment to innovations. Another research department was established in 1966 due to the increased competition in the automobile industry. The company used the research departments to identify the best product development and innovations that would place its products ahead of the competitors. The company employed innovative engineers into the research and development departments and this brought forth the expected results. In the 1990s, the company was leading in the manufacture of light commercial vehicles, with the success being attributed to its innovative engineers (Tiwari and Herstatt 2012, p. 110).
The innovation process for TATA Motors India
Innovation is at the heart of the company’s operation because it believes that its progress is guaranteed by its ability to create new products for the clients. Over the decades, the company has been involved in many innovations in the aspect of products, processes and people. The introduction of steam road roller about more than six decades ago presented its first innovation. In the 1980s, the company used Japanese technology to manufacture small commercial vehicles known as the TATA 407 (Kumar 2008, p. 250). The model was received well in the market and became the leading product in the automobile industry for a period of more than three decades.
A decade after the model was manufactured, the company innovated it further by introducing the Indica platform that sold even better than the 407. Even in the second decade of its existence, it was still undergoing innovations to make it more appealing to the clients. About ten years ago, the company introduced a mini truck called TATA ACE that became one of the leading products in Indian’s small commercial vehicles segment. In 2008, the company introduced yet another innovation in the market, the TATA NANO whose inception was great. The company also acquired Jaguar and Land Rover brands from Ford and transformed them into more appealing products, making them better than the competitor’s.
Apart from the products, TATA Motors India has shown great innovation in the processes it uses in the manufacture and sale of automobiles. The adoption of the TATA Business Excellence Model by the company has played a great role in enhancing the company’s productivity (Becker-Ritterspach and Bruche 2012, p. 239).The model is used to identify the operations of the company including the customer base, sources of revenue as well as the target market. The business model helps the company to identify the areas where it needs to improve based on factors such as finances and marketing strategies. Innovations are heavily dependent on the ability of a company to modify the existing products. To ensure success in product development initiatives, the company has adopted the phase-gate process. Using the approach, the company is able to separate its processes, business changes and product development projects into phases that are separated by gates. This ensures that the process is conducted in a systematic way thus, reducing incidents of errors. By using the business model and the business process approach, the company is able to develop the right product for the target market.
The other factor that has contributed to the success of the TATA Motors India with respect to innovation is its investment in human resources. The innovations by the company are mainly influenced by the capability of the employees. The company promotes and hires a young team of employees to work as innovation leaders in the company so as to perfect their skills and creative abilities. It uses different methods of identifying the human resource needs in terms of training including the balance score cards ((Tiwari and Herstatt 2012, p. 114). The company provides the resources required by engineers and other employees in the company as a way of supporting innovation. It uses about two percent of its turnover on funding research and development initiatives. This is among the primary factors that have contributed to its success. However, the current innovation strategies by the company may needs to be improved to remain at the top of the market. The other companies in the automobile industry such as Volkswagen may outshine the company in future. The following are the potential challenges and solutions that the company may face, as well as the barriers to solving the problems.
The increased concern for environmental conservation today poses a challenge to the automobile companies as their innovation strategies are mainly directed at reducing the emission of greenhouse gases. Most of the innovations by the firms operating in the industry are similar as they are guided by the same purpose of reducing harmful effluents (Som 2006, p. 236). It is therefore hard for the company to develop unique innovations that suit the changing customer needs. The other potential challenge that the company faces is high cost of labor on the market. For the company to attract and retain highly skilled employees, it must have a remuneration package that is more attractive than the competitors’. The ever increasing wage rates in the market are a challenge to the company as it has to keep up with the upward trend, regardless of the volume of output.
While the high remuneration package increases the chances of the company attracting skilled manpower, it reduces the amount of revenue that can be used for other activities such as research and development. The other potential problem that the company faces is the high labor mobility that also affects its ability to retain talented employees and this reduces its productivity. The company also faces the problem of stiff competition from other firms that have been attracted by the high profitability of the industry. Operating in a highly competitive environment is an expensive to the company as it must incur high costs in activities such as advertising and product development.
The challenges faced by the company threaten its ability to grow its profits and expand its market share. Therefore, it is important for companies to identify the most suitable solutions to the challenges that they face. For the current case, the company needs to diversify its innovations beyond the aspect of reducing pollution. While it is important to embark on innovations that reduce environmental pollution, the company should also consider other attractive features that may appeal to the target market (Kumar 2008, p. 263). For example, the company may consider providing low-cost products in the market that serve the same purpose as the competitor’s products. The company should also invest more on other aspects of innovation apart from products. It should focus on processes that reduce its operational costs so that it is able to offer the same products to the market at a reduced price.
Concerning the high cost of labor in the market, the company should consider employing few employees so that it compensates them well. Reducing the number of employees translates to decreased wage expenses, hence leading to low cost of operation by the company ((Becker-Ritterspach and Bruche 2012, p. 241). To ensure that the employees are not overworked, the company should consider reviewing the production process to reduce the number of activities involved through combining them. To retain the employees in the company, there is a need to for the organization to ensure that it provides them with better working conditions than the competing firms. The company should also consider rewarding innovative ideas greatly through financial packages as well as non-financial packages such as recognition, promotions and paid holidays. The company also needs to formulate suitable strategies to deal with the issue of competition. It may need to restructure its business to include new ways of communicating its products to the target market, better than the competitors’. The primary objective of the new business model should focus on the mechanisms that can be used to beat the competition in terms of product developments and marketing strategies.
Potential hurdles to proposed changes
To gain a competitive advantage in the Indian automobile industry, the company needs to address the issue of innovations, high cost of labor and stiff competitions. These are the factors that may bring its productivity down and reduce its market share. Ignoring these factors may only lead to poor management of innovation and company resources that may even lead to bankruptcy in future. However, despite the important role that the proposed solutions have on the company’s sustainability, there are barriers that may slow or hinder their implementation.One of the barriers to implementation of the proposed solutions is lack of enough support from the top management (Bhattacharyya 2006, p. 115). The proposed solutions require funds for full implementation, but the funds can only be approved by the top management. This implies that of the top management does not approve of the proposed solution, they may not approve the funds and this makes it impossible for implementation to be successful.
The other hurdle to the proposed solution is the high rate at which the business environment is changing. The degree at which technology is evolving may affect factors such as competition, thus making it hard for the company to implement proposed solutions on competition at a slow pace. Also, the tastes and preferences of consumers keep on changing, making it hard for the company to invest heavily on the proposed solutions such as those concerned with product development.
In conclusion, it is evident that management of innovation drives companies towards success. To gain a competitive advantage, companies are required to provide products that meet their needs better than their competitors’. The companies ought to ensure that their products are also positioned in the right target market. The ability of a company to make innovative products in a cost-effective way enhances its competitive advantage. To ensure that an organization succeeds in its operations, it is important to identify the potential challenges that it may face considering the changes in the environment. The solutions to such problems should be identified, with a clear focus on how to implement them. The barriers that may hinder full implementation of such solutions should be addressed as well to make the whole process a success. The success of TATA Motors India can be attributed to its ability to focus on innovation with respect to human capabilities, products and processes. It is among the leading firms in the automobile industry in India, but this success may not be long-lived unless the company acts on the potential challenges facing it.
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