Innovation and New Product Development Case Study

Disruption with Nano: Tata's Prospects

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Abstract:
The introduction of the Tata Nano was a classic example of a market disruption where people who previously did not have the money to buy an automobile, could now purchase a car. Since the car was targeting consumers at the lower end of the value spectrum, compromises on quality were possible compared to other cars. The thinnest profit margin had created asymmetric motivation for major car makers who could be satisfied with a profitable market of consumption. Major global players in the automobile industry were also making forays into the low cost car segment to compete with Tata Nano, as well as to capture the rising middle class consumers. But the question was whether Tata could create the asymmetric skill to be successful in disruptive innovation? As far as resource process and values (RPV) were concerned, Tata Motors was in an acclaimed position. Based on RPV theory it would not be irrational to claim that probability of success of the Nano project was high. No matter how lucrative the projected market seemed to be, it was difficult to comment on the success quotient of the car. Rising costs of global intermediates like steel and fuel would increase both the producers' as well as consumer's costs. Moreover, tough competition from other players also questioned the success capability of the Tata Nano.

Pedagogical Objectives:

• To understand Tata's rationale behind launching the 1 lakh rupees car.
• To analyse the RPV theory and disruptive forces.
• To investigate the probability of the success of Tata Nano.

Keywords :  Disruptive technology, People's car, Indian middle class, Tata engineering and locomotive company, Automobile industry, Model T, Purchasing power, Global market, Distributive manufacturing technique, Regional hubs, Assembly line, Buzz marketing, Paradigm shift, Resource, process and value, Frugal engineering'