Operations Management – Lesson 4
Tata Motors (Tata Group) the owners of prestige car brands such as Jaguar and LandRover has launched on March 23rd 2009 - the cheapest car in the world Tata Nano, which is India's "People's Car".
What does $2,000 buy you?
To put $2,000 price tag into perspective, for this sum you can purchase;
- a high spec LCD or
- a high spec HiFi unit or
- 1 or 2 pieces of designer clothes/wear or
- a laptop.
- or a Nano (basic)
The History of the "Classic Cheaper Cars"
(1908) - 100 years ago Model T-Ford (1908) was manufactured -
(1938) - Germany had it's "Volkswagen" Beetle which means "People's Car"
(1958) - Morris Mini Classic (1958)
(1998) - Mercedes Smart (1998)
(2008) - Tata Nano (2008)
1908 T-Ford 1938 - VW Beetle 1958 Morris 1998 Smart
2008 Tata Nano
Lower vs Higher end ranges
We see that both Mercedes Benz and BMW are also offering a wide spread in "lower vs higher end" offering;
- Mercedes Benz ; Smart - Mercedes Benz - Maybach
- BMW: Mini Cooper - BMW - Bentley
"The Whats" (Customer requirements)
A comfortable, safe, all-weather car, high on fuel efficiency & low on emissions
- Stylish - family in mind, roomy passenger compartment, generous leg space and head room, comfortably seating four persons.
- Price - at $2,000 and Financing offered (Tata is in talks with 15 local Banks) will make this an viable alternative to the 2wheel buyers.
- Performance and Fuel Efficient - with a 624cc, 35Bhp, MPFI, top speed of 105kmh, 23.6km/lt.
- Safety - whilst it has passed or exceeded all local tests, it still falls far behind the European standards which means that the European version will cost around $6k.
- Environment - with a CO2 emission of 101mg/km and a high fuel efficiency of 20+ km/ph, the Nano provides an affordable transportation solution with a low carbon footprint.
- Warranty - set at 18months or 24,000 kms
"The Hows" - (Key Design Characteristics)
Quality (European partnership) whilst 97% of the car in locally sourced many of the key components are supplied by European firms
Cost Reduction - achieved as Nano has no power steering, no boot opening (accessed via rear passenger), 1side view mirror, 3 nuts i/o 4 nuts for the wheel.
Engine - a rear mounted engine to help maximise interior space makes the Nano similar to the original Fiat 500.
Interior - The Nano has 21% more interior space, 8% smaller exterior, when compared with its closest rival, the Maruti 800. The car will come in different variants, including one standard and two deluxe variants. The deluxe variant will have air conditioning, but no power steering.
- Performance - with a 624cc, 35Bhp, MPFI with a top speed of 105kmh delivering 23.6km/ltr
European suppliers with key parts on the Nano
Ensuring highest quality was assured by creating strategic alliances with well known marketleaders in components-delivery such as;
Autoliv: Seat belts / Behr: HVAC / Bosch: Starter motor, engine-control module, injectors, sensors /
Continental: Transmission speed sensors, fuel-level sensor, fuel pump / Mahle: Fuel filter, air cleaner
Saint-Gobain: Glazings / TT Electronics: Speed sensors / Valeo: Clutches / Vibracoustic: Engine mounts / ZF: Tie rods
"Hows vs Hows"
The only way to make the Nano as cheap as possible is to have all the design characteristics harmonized in such a way that "function and design" are optimized, making it a well build product without making too many compromizes, hence a recipe for a "Success Story".
"What vs Hows"
As the customer is getting a product which is so very low priced, it's expectations should normaly not be too high, however given the set of standard expectation levels of the car industry, I see mostly strong relationships with the the design characteristics as without the one the other could not be achieved, hence overtime we will see that the design specifications will change to accomodate customer requirements as the Nano will evolve (become mature) and also matched against increasing disposable income which allow for an increase in specification and also increase of the price.
Slack et al, 2006, "Operations and Process Management", Prentice Hall
Wally, 2009, Warwick MBA Study note on "Operations Management"