Threats on Tata motors
Threats of new entry: the risk of new entry shows the level and ease t which new companies can enter the automobile industry. Entering into the automotive industry business will require a new company to have upfront capital, economies of scale, customer loyalty, trademarks, advanced technology to manufacture modern and unique products, compliance with government regulations, and patents, among others. This makes it difficult for new entrants who have no prior understanding of the industry. Tata Motors has been in operation for many years and operates in the automotive sector, which has high economies of scale, requires significant up-front capital for starters and advanced technology, among others. Thus we can conclude that there are high barriers for a new entrant to the industry.
Therefore, there is a weak threat of new entrants, although a supplier of automobile parts may have a safer entry because of the industry’s experience. Also, it is easier for auto companies to venture into the industry, as the case of Google and Apple, who are making a powerful entry to the automobile industry (forbes.com, 2015). The current demand for electronic cars, cars with low emission, advanced technology, and current changing needs are likely to strengthen the market.
The threat of substitute: There are several substitute products in the market, and buyers can easily switch from one brand to another. Therefore, this is a threat to Tata Motors, which can only be solved if the company can improve its efficiency and lower production costs but deliver value products to customers. Tata products face Ashok Leyland products, the leading competitor on commercial vehicles. However, Tata Motors can strike out Ashok Leyland if it can work on the brand’s efficiency, cost, and quality. Similarly, two-wheelers are also substituting for Tata Motors, since the cars dominate the Indian market, offering affordable two-wheeler cars will attract customers. This is an excellent opportunity for Tata motors, but at the same time a challenge in that, customers do need not only affordability but also safety and efficiency.
Industry Rivalry: this is the most significant force among the other powers, if a company fails to understand the industry dynamics, it will defiantly feel the heat. The faster a company can respond more quickly to changes in technology, government regulations, and consumer expectations will determine its level of rivalry. Tata Motors’ competitiveness in the industry, especially in the Indian market, saw the company successfully acquire premier brands in 2008; Jaguar Land Rover while Fold a competitor in the industry failed to meet the expectations (Berggren and Dhruba, 2015; Borah, Karabag, and Berggren, 2015). The acquisition was an excellent movie for the company led to the company’s increased market share.
Tata Motors has various operating units and operates in a competitive market and faces stiff competition from Mahindra and Mahindra and Ashok Leyland, and other global competitors. Thus, to deal with the current competition, the company needs to develop a comprehensive solution to face intense competitive forces. Tata motor is facing the rivalry by partnering with Waymo, a self-driving technology company, to design Jaguar to the self-driving brand. Therefore, there is intense competition; this is a real threat to Tata Motors.
Bargaining power of customers: customer bargaining power is influenced by their ability to control the product’s demand. This happens when there are existing alternative products, product information availability, low costs of switching products, and strong bargaining power, among others. In the past, Tata faced a strong customer rejection Tata Nano product, a force that the company felt financially. Thus the company needs to focus on customer service, customer preference, and efficiency. Customers’ bargaining power is moderate, but the company needs to strengthen its efficiency and customer satisfaction.
Bargaining power of supplier: There are various automobile suppliers in India, and thus the supplier bargaining power in India is fragile. Most of the materials needed in car manufacturing are steel, a raw material Tata steel (one of the Tata group companies) is producing. This makes Tata Motors have a more significant advantage compared to its competitors. Tata steel is the core supplier of steel to Tata Motors; hence, it’s expected that the steel prices will be favorable, resulting in a low cost of car production. Similarly, the automobile industry is currently facing technological advancement trends, and customers are looking for modern cars with technology features installed; hence, Tata Motor’s partnership with Tata technologies to offer technical advice and services set Tata motors more advantageous compared to its competitors.