The Costco Craze

The Costco Craze


31974931 Surname Cheong Given name Dominic Email [email protected] BUS 317C Stragetic Management Internal / external 11 October 2013 1 Short Essay (Megafactories: Tata Nano) Mr Frankie Yee

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Content Page
1. Introduction……………………………………………………………. 2. The Value Chain……………………………………………………… a. Inbound Logistics……………………………………………. b. Outbound Logistics…………………………………………… c. Technology…………………………………………………… d. Human Resource……………………………………………… 3. Core Competencies…………………………………………………… 4. Recommendations……………………………………………………. 5. References……………………………………………………………. 3 3 3 4 4 5 5 6 7



Tata Motors Limited (TML) is headquartered in Mumbai, India. Initially as a manufacturer of locomotives, turned India’s largest automotive leader in every categories of commercial vehicles. TML is the world’s 5th extensive manufacturer of medium and heavy commercial vehicles and also the 18th largest manufacturer of motor vehicles through the number of volume produced worldwide. Its growth and success over the past 68 years is attributed through the comprehensiveness of economic stimuli, having the consumers in mind through understanding their needs and wants. TML portrayed competency to convey the meaning of the desired offerings to the consumers via the advancement of its research and development (Tata Motors, n.d.). A good overview, succinctly presented.

The Value Chain
Inbound Logistics TML decided the price of the Nano at $2,500 in consideration of consumer affordability. TML engineers and partners of joint interest have worked closely together towards manufacturing the Nano within the budget. Both parties have considered their targeted customers through understanding consumer’s cost of living within India and through that discovering ways to minimize cost (Scanlon, 2013).

TML ingenuity approaches of the supply chain. In designing the Nano, TML have engaged with suppliers such as Bosch, a global leader in automotive components. Inviting Bosch to be part of the Nano project through the development of components at a reduced price (Scanlon, 2013). Moreover TML have extended-term contracts whereby ¾ of the components are from individual supplier source (Engineerlive, n.d.).



Minimizing expenses through fastidiously chosen suppliers with the capabilities to produce quality standards, allowed TML to reduce cost. This savings will be able to pass down to end consumers and likewise compete with competitors within the similar target market like Maruti. Good discussion. Outbound Logistics TML outsourced it logistics and distribution to Tata Distribution Company, a wholly owned subsidiary of TML, that focused on its sales, logistics and distribution of both its passenger and commercial vehicles. It is spread out across over 200 dealers across the country (Zachariah and John, 2008). This enables Nano agents to receive the cars from the hub and distribute it within their nation. Logistics as a whole demands specialized skills and focus. TML have constantly looked in ways to reduce expenses. An example partnering with a single transporter, assuring inbound logistics, return loads and increasing the number of units uploaded through a single transportation (Tata, 2010). Secondly, the selection of materials and operation procedures. TML have provided engineers with the aid in technological process and relevant training to employees and suppliers, improving existing and new process knowledge and skills (Tata, 2010) The material of the Nano body kit that was previously used, like plastics and adhesives was discarded as it cost more, was than replaced with metal (Engineerlive, n.d.). This initiative increase efficiency in production, likewise reduces unnecessary wastage during the design and manufacturing process, and subsequently helped to effectively reduce the overall cost price to manufacture the Nano. Ultimately this would enable TML to align the Nano, keeping it within the targeted price and increase customer perceived value through value proposition. Excellent Human Resource Management TML have a diversified working culture environment. Employees are either being selected from automotive industry or industry within the similar sector. In ensuring consistency in the growth plan of TML, regular recruitment programs via engineering and management institute are



conducted to ensure the employees hired, remains skillful, knowledgeable and kept up-to-date of the environmental surroundings and alike to its competitors or better.

Moreover also with programs (Mini-assessments and Fast Track Selection Scheme) to discover employees with aptitude, providing them with prospect and subsequently for opportunities to lead. This sets as a platform to develop creatively thinking through sharing of skills and expertise among one another in the organization. TML initiatives ensures that the firm stays performance-oriented and task-driven with the employees being well equipped on the skills and expertise to carry out their work autonomously. Ultimately employees are motivated with a common objective, which would translate and reflect on the quality of worked being produced towards the end product. (Tata Motors, n.d.). An excellent discussion of the value chain activities and how the values are created. Well done.

Core Competencies
Creativity and Innovativeness TML core competence contributed from the end product of the Nano, with radical approach from the designing, manufacturing to the logistics and right down to the daily operations. The uniqueness and innovativeness of the Nano stands out from its competitors that comes from its modular design alongside with various registered patented design. This assured TML design are not inimitable to competitors out there. In addition, the components for Nano can be build, packaged up and be shipped separately in kits. This is than distributed to dealers in various country, assembled and serviced by the local personals

TML approach contrasts with the strategy of other manufacturers. Creating an opportunity for an open distribution and multiplying modularity in products and processes. This added value to the organization, which would in turn be a source of competitive advantage (Hagel and Brown, 2008).



Tata Group as a global conglomerate Tata Group has multiple joint ventures and collaborative products that have assisted Nano in bringing out solutions kept within a cost structure. For example, Tata Johnson controls, developed the seats for Nano, and Tata Taco focusing on parts like interior injection moldings (Synder 2008). As seen in the Nano, it is difficult to imitate and make cars at such low cost. Moreover the valuable resource that Tata have established through long-term relationships with its suppliers will be difficult for its competitors to implement overnight. (The Economist 2009)

TML is able to leverage its competencies through various specialized expertise, thereby enabling TML to control and maintain its production quality level making it a valuable resources and sustaining a competitive edge over it competitors. Excellent discussion.

With increasing threats from strong players from countries such as china, it will have an impact on TML external environment factor. A strong market competition in the automobile industry would cause TML to lose it positioning in the market, and may result in TML to have difficulties maintain their relationship with it suppliers (Steckel and Richard 1995). TML should consider creating alliances with its suppliers and its related firms. This allows a separation between its rivals and further strengthening the company core competence against other firm. However firms who are not in the alliances, may lose doing business with TML, but with other TML related firm (Land Rover) it will still stretch the company bargaining power over it competitors. With new alliances, it will further enhance TML core competencies, likewise reinforce the rareness and inimitable as these alliance can only be created through larger organizations In summary, a core competency loses its value once it is no longer in relevant against environmental forces. In order for TML to sustain their competitive edge within the market, it is imperative for them to be vigilant and adaptive towards changing environment needs.


Bibliography References
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better-smart-car (accessed September 29, 2013) Choudhury, S., 2010. Tata: Nano Sales Drop Not Linked to Safety. (accessed September 30, 2013) x Engineerlive. n.d. How Tata has built a car that costs less than a motorbike. (accessed September 28, 2013) x Eyring, M., 2011. Learning from Tata’s Nano Mistakes. (accessed September 30, 2013) x Hagel, J., and S. Brown. 2008. Learning from Tata’s Nano. September 27, 2013) (accessed











rejig. (accessed September 26, 2013) x Munroe, T., 2012. Tata Nano, world’s cheapest car, struggles to gain traction. (accessed September 30, 2013) x Muralidhar, S., 2013. Rough ride for Tata Motors. (accessed September 28, 2013) x Raj, R., 2012. Column: Globalising Tata Motors. (accessed September 30, 2013) x Ramsinghani, M., 2011. The Trouble with India’s People Car. (accessed September 28, 2013) x Scanlon, J., 2009. What Can Tata’s Nano Teach Detroit? (accessed September 28, 2013) x x Steckel, Richard H. “Stature and the Standard of Living.” Journal of Economic Literature, vol. 33, no. 4 (1995): 1903-1940. Synder, J. 2008. “Suppliers help keep cost of Tata car: mature technologies reworked to meet $2,500 price target.” (Accessed September 28, 2013) x x

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You are required to write an essay on the following topic which is
to be based on 1 of the following 2 of the videos (“Megafactories: EA Sports FIFA 2012” or “The
Costco Craze”): “Construct the corporate value chain of either EA Sports: FIFA 2012 or Costco,
identifying the key activities behind the competencies that have been developed to create value
for the firm. How does the value created in the corporate value chain become valuable?” (See Fig.
2).This essay is to be based on information gleaned from the video as well as your own research. It
is to be fully referenced and grounded in theory.


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