Entry Mode for Tata Nano in Hungary

Entry mode The number of passenger car in Hungary is 305 per 1000 people according to the European Automobile manufacturers association. The estimated car sales in Hungary is 3 Million and from the sales figures it would take 60 years for all cars in Hungary to be exchanged for a new one. As per PWC report it shows that majority of Car dealers in Hungary are Family businesses that are

usually associated with 1 national distributor. The majority of distributor operates in the Budapest area or the Pest County. Most of the dealers present in Hungarian market for more than 5 years now.

The main players in the automotive sector are Audi, Suzuki, Opel and individual multinational suppliers as well as the traditional Hungarian manufacturer Rába. Counting more than 600 players the country is widely considered as the supplier base for the manufacturers established in the region. There are outstanding opportunities for joint production with companies in the region, and also specific new opportunities in technology and know-how transfer. Especially after the 2007 EU enlargement, Hungary has gained a more central position in the EU area, and there is optimism that the established automotive industry may see growth opportunities stemming from this.

Low labor costs, cost of transport, communications and general living is lower in Hungary compared to other countries. Hungary being the Advanced emerging country in Europe. Because of the strong growth in middle class income group people and that of premium group segment, overall demand of automobiles, be that a car or a bike attained great heights. Today, Hungary has a population of 10 million and a car fleet of nearly 3 million cars. In 2007, it produced 290,235 passenger cars and 3,566 commercial vehicles. The revenues for 2007 amounted to € 15.9 billion, and the automotive sector share represented 19.4% of total industrial production. The share in total exports was about 20%.

There are approximately 630 motor-vehicle manufacturing companies; from this, circa 240 have audited quality assurance systems. The number of employees in the sector is approximately above 110,000, including a considerable number of highly skilled workers. Proportion of employees involved in main-unit manufacturing is 12% and in part-unit manufacturing, 88%. Entry strategies used by various Automobile companies in Hungary Large multinational firms play a very significant role in the national economy, accounting for the overwhelming proportion of the nation’s GDP, exports and R&D activity.

Hungary has successfully mastered economic transition benefiting from its geographic location and attracting an important share of foreign direct investment in central and Eastern Europe. Among the most important investments made over the past year are the following: •German giant Daimler has decided toinvest € 800 million creating 2,500 jobs to build Mercedes A and B class in Kecskemét.

The factory will produce 100,000 cars annually from 2011; •Audi Hungária Motor Ltd., invested € 80 million in its new machine-tool factory in Győr; •Renault-Nissan has invested € 13 million to set up a regional spare parts supply centre in Győr for the Hungarian, Slovak, Czech, Slovene and Romanian markets; •Japanese Denso has recently invested about € 100 million to enlarge its diesel engine fuel-injection factory in Székesfehérvár, which is ultimately expected to employ over 2,000 people;

•Suzuki Hungary PLC invests € 400 million to double production at its plant in Esztergom to 300,000 pieces a year by 2007; •By 2006 Robert Bosch Electronika Ltd. production centre in Hatvan became the Bosch Group’s largest producer of electric parts all over the world; •Hungarian affiliate of Norsk Hydro, Hydro Aluminium starts to build a new factory beside its current one in Győr with a greenfield investment; •Japanese Bridgestone has brought its cutting-edge BIRD production system from Japan to Hungary.

By investing € 195 million in Tatabánya, the company establishes a production facility with a daily capacity of 8,000 tyres and employs 185 new employees; •Korean Hankook Tire will invest € 528 million by 2010 in its brand-new tyre factory in Dunaújváros that will produce 10 million tyres per year and employ 1,500 people; •Japanese Asahi Glass Co. has invested USD 162 million to build its facility in Tatabánya that will employ 600 people to produce safety glasses; •Japanese Ibiden has invested more than €100 million in the first phase in its factory in Dunavarsàny and will employ 1,200 people to produce ceramic filters for diesel engines;

•German ZF Hungária Ltd. is investing € 74 million in Eger to build its second manufacturing plant. In 15,000 sqm premises and with 1,400 employees, ZF will manufacture 1.2 million steering gears, 1.7 million A/C pumps and 120,000 gearboxes per year. Taking cues from the companies which are settled earlier in Hungary; it can be deciphered that the best options available for entering into Hungarian market are either JV or Strategic alliances.

This will help Tata to gain roots in new markets and then keep on modifying the offerings for public according to changing tastes. There are several reliable suppliers with quality certificates which can actively contribute to the successful and economical operation of Tata Nano. From the above we can also assume that a complete car can be built in Hungary.

Staffing

Marketing

Product •Tata Nano in India is already known as the Peoples Car • Fuel efficient, advanced technical features, sporty looks. • Available in petrol and diesel version Engine Type624 cc, 2 cylinder, MPFI Maximum Engine Output 38 PS @ 5500 ± 250 rpm Maximum Torque 51 Nm @ 4000 ± 500 rpm Maximum Speed105 kmph Gradeability30% TransmissionSynchromesh on all forward gears, Sliding mesh on reverse gear with overdrive on 4th gear No. of Gears4 Forward + 1 Reverse

Price •The existing objective is to capture the market share. •To Increase Market share – focused its promotions strategy on •Middle and Low Income group •The Price should range from 2500 to 3000 $ •Make options available within or around their budget.

Place and Promotion •The initial place for the launch of the Product should be looked at Budapest. •Tata is providing a 18 months Or 24 K Kilometers warranty in India, It can’t be considered as very good compared to what one gets at the international level but it is still not bad and it sounds •A transparent and easy booking style would be required to show faith in customers of Tata •The One form booking as a promotion offer can be considered where the lucky buyer can be chosen from a draw •Tata can tie up with local banks for easy finance of the cars. •Car replacement with Tata Nano.

•Tata Nano car can be booked for lower cost.

•Low maintenance is another key feature of the Car

Branding •Peoples Car on all the TV advertisement and Banners across the Country •Multi Branding – introduction of more brands into same segment/ category - Auto Expo from Nano Sport to the rally Nano, the Electric Nano

Segmentation

Segment CharacteristicsExamples Mini Car Segment •Preferred Price Range below $ 9,500 •Extremely Difficult to enter this marketSuzuki splash, Chevrolet spark Small Car•Preferred price range: between $10,000 to 13,000

Suzuki Swift, Skoda Fabia, Ford Fiesta Lower secondary•Preferred price range: between $15,000 to 22,000Ford Focus, Opel Astra H, Volkswagen Golf Upper•Real world-class car and people who are ready to pay for it •Preferred price range: between $30,000 to 42,000Skoda Octavia , Opel Insignia Volkswagen Passat Sport/ Top/Luxury•Super Premium Cars

•Tiny SegmentMercedes Benz E 229, Audi 6, BMW

As the small car segment cost is between $ 10,000 to 13000 Tata can capture the market by launching the Car at 2500$ and this could really create a competitive market. The preferred market would be to look at small Car segment as the people of Hungary are looking for small car. Also in the Emerging market the population is more youthful and growing the price range would be very competitive

Targeting It should be targeted not only at the first-car buyers but also at those who wanted another one, or a change from set of staid-looking wheels. Target Age Group 18 – 30 years Major Target Budapest

Positioning

“Peoples Car” Style, Modern Looks and Young Attitude. Comfort, Power and Luxury in “Small Package

Differentiation  “STYLING” Concept Small Family Car Pleasure driving & engineering depth. Competitive PDMP..Price,Drive,Mileage & Performance.

Conversion model: Cool, Stylish, Sporty , European style looks Support of Large Tata Network presence in Eastern Europe

Appendices, References: http://www.gartner.com/it/page.jsp?id=1173712 http://www.pwc.com/hu_HU/hu/kiadvanyok/assets/pdf/CDS-EN-2011.pdf http://www.acea.be/index.php/country_profiles/detail/hungary#text