In the recently announced results Q2 (September 2011) Tata Motors posted great results. Its net profit registered an increase of about 100 times to Rs 2223 crore compared to Rs 22 cores of the previous year. , Tata Motors posted Rs 1600 cores as against Rs 22 cores Q2 2011. This is an impressive turnaround. Tata Motors has become a matter of debate when it acquired Jaguar Land Rover (JLR) spending whopping $2.5 billion (Rs 12500crores) dragging the company into red (consolidated net loss of Rs 2505 in 2008-9).
Tata Motors is at the top of Indian automobile industry. It participates in both commercial and passenger vehicle markets. In a short span to time the company has evolved from primarily being a maker of commercial vehicles to a force to reckon with in the passenger market as well. Has the trajectory of the company something to do with architecture?
Ratan Tata is an architect from Cornell University. An architect is different from an engineer. Architect is trained to have a global perspective whereas engineers by are possessed by details. Architects have an integrative mindset by which they visualize parts as a whole, engineers are narrowly focused (I owe this to my discussions with Prof Mitra yesterday). An architect’s role is to visualize a structure by observation of both what is ‘present’ and what is ‘missing’. Tata Motors under the stewardship of Ratan Tata is carefully architected into a complete motor company not merely a company with different divisions. An aggregation of parts is not the same as an integrated ‘whole’.
Let us turn to the company’s architecture. Starting as a locomotive manufacturer in 1950 the company went on to expand into commercial vehicles. The ‘Tata’ name and the symbol ‘T”, as a result, got inextricably connected with commercial vehicles. With the sight of burgeoning passenger car market, the company entered the market with ‘Tata Indica’ (combination of ‘Indian’+ ‘car’) with the proposition ‘more car per car’. The idea was to lure price/ value sensitive buyer and company generated huge volume. This success was followed by moving up to the next level of sedan and then came ‘Indigo’( 2002)This was three box or sedan version of Indica. The brand Indigo derived from Indica (‘Indi’ used to leverage upon the equity) was further expanded by adding a station wagon variation ‘Indigo Marina’ (‘Marina’, attempted to indicate the modification, 2004). Later in 2009 the company further expanded its Indigo sedan range upward and launched ‘Indigo Manza’. This extension was meant to take the Indigo brand further up as the brand was given an image of luxury (the color, body shape and features underwent a change). Meanwhile Indica brand was toned up (V2 and Vista) and horizontally ‘Xeta’ was launched to branch into the petrol segment. Besides the movement upwards, the company moved downward by creating an ultra economy segment by the launch of ‘Nano’ (2009). In its latest move the company has launched ‘Vista’ (2011). A premium hatchback positioned as a compact which offers sedan like experience. In terms of branding and communication the company, ‘Vista’ plays down its connection with Indica to give it a new image.
The company leveraged its diesel engine prowess and also grew by moving into adjacent segment of the vehicle market by launch of SUVs. Tata Sierra and Tata Estate (now discontinued) and Tata Sumo were early entries into this segment. Tata Safari (launched in 1998) later fitted with ‘Dicor’ engine became a serious player. In 2010, the company launched a ‘cross over’ vehicle named ‘Aria’ combines three concepts: sedan, MPV and SUV (2011).
In the sedan market, now the company faced a challenge further to ‘move up’ in the segment hierarchy. The top ends of the car markets are dominated by companies with heritage advantage. The luxury brands besides functionality are created by heritage or pedigree and ‘exclusion’. The class connotations are generally the hall mark of luxury brands. Tata’s equity leveraged very successfully into the lower ends of the market was inept for this segment. And then came JLR acquisition. This leapfrogged the company into a space which excluded a company like Tata. A company can make cars as fine as Jaguar or Land Rover, what can’t be manufactured is the ‘imagery’ associated with brands like these. These are formidable barriers to entry.
Tata Motors starting with Indica (1999) both moved up and down and horizontally to participate in adjacent segments. It is akin to carpet bombing by which attempt is made cover up the entire target area so that no space is left out. The growth trajectory that the company has adopted certainly has something to do with the discipline of architecture. The company has been architected to be serious player in the emergent car market flattened by the forces of globalization.