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Building World Class Competence

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Presentation on theme: "Building World Class Competence"— Presentation transcript:

1 Building World Class Competence
TATA Motors 21 April 2006

2 Contents Overview Building World Class Competence Results

3 TATA Motors India’s largest Automobile company
Strong Domestic Position Robust Financial performance 2nd largest company in Private sector Globally ranked as:- 2nd largest Bus manufacturer 5th largest Bus & Truck manufacturer Largest Indian Exporter of Automobiles Largest portfolio of products by an Auto major:- Mini, Light & Heavy Trucks Range of Buses & Coaches Passenger Cars & Utility Vehicles Indigenously developed & India’s 1st Light Commercial Vehicle (1986) Sports Utility Vehicle (1998) Passenger Car (1998) Mini Truck – ACE (2005) Largest R&D network in India with offshore centers in :- Korea (Gunsan) Spain (Zaragoza) UK (Midlands) 1st Engineering company to be listed on NYSE (2004) Market leader in Commercial Vehicles in domestic market with ~60% MS 2nd largest player in Passenger Cars in domestic market with 16.5% MS Nation wide Sales, Service, Spare parts and Auto financing network with over 1,200 customer touch points Sales 400,000 vehicles Revenues USD 4.7 Bn Profit USD 0.3 Bn (Post Tax) (All figures are for FY 04-05)

4 Evolution of TATA Motors: Liberalization brings greater opportunity & challenges
Protected Economy Economy opening Liberalization USD Bn Protected environment Less developed supplier base Limited domestic competition Entry of MNC players Developed suppliers Product complexity 4.7 Collaboration with Daimler Benz Self Reliance Cyclical impact New Strategy 1st vehicle rolled out within 6 months of contract (1954) Vertical Integration Very little outsourcing Focused Vendor Dev Increase in Outsourcing Outsourcing Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 USD 2.3Bn L O C O M O T I V E S USD 0.7Bn USD 35.9Mn USD 0.05Bn USD 0.2Bn 0.3 USD 1.8Mn -0.1 04-05

5 Similar with Global CV Industry Dis-similar to Global CV Industry
Cyclic nature of Commercial Vehicle Industry required de-risking of Company’s business model Domestic CV Industry Sales CAGR: 6% Indian CV Industry Characteristics Similar with Global CV Industry Cyclical Low Volume (in ,000s) Dis-similar to Global CV Industry Secular long term growth trend Early stage of road development

6 Increasing intensity of competition required building World Class competencies
Competition in LCV Market All Models Indian 59 58 52 48 37 Competition in Passenger Car Market 42 All Models 36 Foreign 12 22 Indian 24

7 Contents Overview Building World Class Competence Results

8 Building World Class Competence
Offsetting cyclicality & de-risking business model Increasing Competitiveness

9 TML Passenger Car Market Share
1. Offsetting cyclicality & de-risking business model a. Entering new segments & increasing presence in less cyclical segments Personal transportation - Passenger Car TML Passenger Car Market Share 16.9% 16.5% 14.7% 10.7% Size of Zen Interior space of an Ambassador Economy of a Maruti 800 6.8% Bus Industry growth 50,300 45,500 43,500 Fully Built Buses & Coaches 35,300 Small Buses Controlled market Less fluctuation in sales Explosive growth projected in demand due to improvement in road infrastructure 22,300 Large Buses

10 2. Increasing Competitiveness
Being competitive with International competition in domestic & International markets International Players TATA Motors Technology & Quality Gap Maintain Reduce Cost Gap Reduce Maintain TATA Motors Competitive Advantage:- Providing vehicles with Highest Life-cycle Profitability to customers

11 Building World Class Competence
Offsetting cyclicality & de-risking business model Increasing Competitiveness Product Development Supply Chain Marketing & Sales International Business Human Resources Performance Systems

12 + Towards building World Class Competencies 1. Product Development
A. Passenger Car Indica Indigo Marina + $0.55 Bn Generation 1 Generation 2 TML Market Share In B & C segments $1.1Bn Indigo: 33% (#1) Indica: 19.5%(#2) (behind Alto) Our 1st generation cars (Indica & Indigo) are competing with competitions’ 5th or 6th generation cars & are helping Company to gain Market Share in Car segment

13 Impact of ACE on 3 Wheeler Sales
Towards building World Class Competencies 1. Product Development B. Introduction of India’s first Mini Truck – TATA ACE for last mile distribution Beginning May’05, ACE sales have grown to 50,000 nos (annualised) Impact of ACE on 3 Wheeler Sales Pkups ACE L3W S3W

14 Towards building World Class Competencies
1. Product Development C. Moving from ‘Developing Products’ to ‘Managing Product Development’ In house Product Development Engg Research Centre Pune, Jsr, Lko Management of Product Development needs TML TATA Technologies INCAT, UK Aggregate Suppliers TATA Daewoo Korea Outsourcing Partners Hispano Carrocera Spain Bus Body Building ACGL - Goa TML-European Tech Centre, UK Product Life-cycle Management (PLM) system for effective product data management & analysis Institutionalizing New Product Introduction (NPI) Process across the organization Incorporating ‘Voice Of Customer’ – for meeting Customer expectations Advanced Computer Aided Design (CAD) Environment for product design, virtual testing & validations for reducing development time and enhance effectiveness

15 Building World Class Competence
Offsetting cyclicality & de-risking business model Increasing Competitiveness Product Development Supply Chain Marketing & Sales International Business Human Resources Performance Systems

16 Towards building World Class Competencies
2. Supply Chain A. Manufacturing – Lean manufacturing, improvement in Quality & Productivity Lean Manufacturing Single Piece flow Flexibility & Scalability Centre of Excellence (CX) SMED (Single Minute Exchange of Dies) JIT supplies / KANBAN KAIZEN / Poke-Yoke Increase in Productivity (Equivalent Veh /Man/yr) 2.2 X Improvement in Quality Design Quality Build Quality Special emphasis on Visual Quality & Performance parameters X Enhancing People Capability Multi Skilling & Multi Tasking Small Working Groups Advanced & focused training Modernization of facilities

17 Towards building World Class Competencies
2. Supply Chain B. Outsourcing & Global Sourcing 2000 & beyond Controlled economy Protected environment Less developed supplier base Limited domestic competition Open economy Entry of International players Developed supplier base Product complexity 1. Outsourcing 82% 75% Highly Vertically integrated company 60% 57% Outsourcing content 1990 2000 2005 2005 ACE M&HCVs 2. Global Sourcing : Steel, various aggregates & other components

18 Towards building World Class Competencies
2. Supply Chain C. Vendor Management 1. Source Selection 2. Development 3. Management 4. Partnering Past performance Managerial capability Technology Knowledge Process development Quality Capacity rate Training 2 way communication Change adoption New Technology New business Rating performance Improvement Relationship building Rationalization Features Early involvement of Vendors in product design & development Focus on ‘overall least cost’ Self Certification of Vendors e-Commerce/ e-auctions & other IT tools (PLM , SRM)

19 Towards building World Class Competencies
Leading to reduction in Break Even Point BEP was brought down to 1/3rd of capacity by:- TML’s BEP as % of Capacity Direct Material Cost Reduction Variable Conversion Cost Reduction e-Sourcing – Largest e-Sourcing company & among Benchmark companies in Auto Industry Alternate Sourcing / materials Benchmarking, tear down & design changes Negative working capital – Unique distinction for an Engineering Company Lowering of BEP has prepared the Company to withstand severe demand fluctuations

20 Building World Class Competence
Offsetting cyclicality & de-risking business model Increasing Competitiveness Product Development Supply Chain Marketing & Sales International Business Human Resources Performance Systems

21 Towards building World Class Competencies
3. Marketing & Sales A. New Customer Segmentation approach - To develop products as per target customer requirements Example: Pickup Customer Segments India Today India Tomorrow A B C D

22 Towards building World Class Competencies
3. Marketing & Sales B. New Sales Planning Process Inquiry Stage 1 Stage 2 Sale Non uniform Sales processes at various dealerships Sales process Benchmarking Addressing gaps / modified Sales process / Standardization Embedding Sales process in IT enabled CRM system CRM data analysis for sales trends & sales process improvements Largest deployment of CRM (Siebel) system world wide in Auto Industry covering all TATA Motors Dealerships & Workshops

23 Uniform TATA Motors identity
Towards building World Class Competencies 3. Marketing & Sales C. TATA Motors Corporate Identity Program Uniform TATA Motors identity

24 * Sumo, Sierra, Estate, Pickup
Towards building World Class Competencies In FY 05-06, TATA Motors achieved all time high domestic sale of > 400,000 vehicles TATA Motors Sales CV Market Share ~ 60% (# 1 ) Car Market Share ~ 17% (# 2 ) Cars (47%) Cars* (17%) CV Market Share – 51% Car Market Share – 0% CVs(53%) CVs(83%) CVs (100%) * Sumo, Sierra, Estate, Pickup

25 Building World Class Competence
Offsetting cyclicality & de-risking business model Increasing Competitiveness Product Development Supply Chain Marketing & Sales International Business Human Resources Performance Systems

26 Strategic importance of International Business
Towards building World Class Competencies 4. International Business A. De-risking business from cyclicality of Domestic market Strategic importance of International Business Products meeting Global Standards Entry of Global Players in India World Class Road network International Emission & Safety norms CAGR: 6% 2. To offset domestic cyclicality effect Greater share of IB can dampen the effect of cyclicality in domestic market 3. Economies of Scale For advanced products, IB markets provide economies of scale 4. Accelerate Growth Growth opportunities in International markets Domestic leadership image to be leveraged effectively for building relationships in global markets

27 Towards building World Class Competencies
4. International Business B. Organic Growth Market Attractiveness & Potential High Low South Africa South Korea Sri Lanka UK Italy Bangladesh Nepal Saudi Arabia Ukraine Malaysia & others… 1 Regulatory Environment Emission, Safety, Entry regulations 2 TML’s ability to address markets Based on Stage of Market development 3 Cyclicality of these markets was out of phase with the Indian market Product offerings were developed/ customized as per market requirements e.g. South African market required vehicles with Higher Power to Weight ratio as roads are highly developed

28 Towards building World Class Competencies
4. International Business B. Organic Growth – TATA Motors I B Sales 50,500 35 5.3 times 30,500 40 9,500 45 No of countries Today, entire range of automobiles from Mini Truck to Heavy Trucks to Buses to Passenger Cars under TATA Motors Brand is exported to 35 countries

29 Towards building World Class Competencies
4. International Business C. Inorganic Growth – TML acquired Daewoo Korea in Mar’04 Addition to Topline Enhanced Product portfolio Growth in South Korea Managing business in a developed country Operating high quality manufacturing plant Lead change in domestic market Complementary Product Range TATA Novus was launched in India in Dec’05 TML range a HP b HP Medium Truck was launched in Korea in Dec’05 Daewoo range b HP c HP

30 Towards building World Class Competencies
4. International Business C. Inorganic Growth – Daewoo acquisition provided us with valuable learning to initiate Brand building in Korea (even before the acquisition happened) Be prepared for being evaluated Entire Daewoo team was closely monitoring TML team’s work practices & behavioral traits Collect first hand knowledge from market & customers Interactions with customers & local transport associations Customer reaction… “No existing Company management has bothered to ask me how I feel or what I want…and here you are doing so even before taking over the business…” Focus on human integration & communication Overcoming the language barrier India considered low on technology TATA Motors Brand Building

31 Towards building World Class Competencies
4. International Business C. Inorganic Growth – Evolution of Cross Cultural partnership with Daewoo Synergizing Sharing of best practices Work Ethics Corporate Governance Harmonization Fine tuning Music, movies, food, .. Sister City Concept Familiarization Cultural familiarity Country visits Initiation Basic understanding Language familiarity

32 Towards building World Class Competencies
4. International Business C. Inorganic Growth – TATA Motors in Korea Synergy of key attributes for making a Global Company Good Corporate Governance Cost effectiveness Strong Engineering base Work Ethics Quality Productivity Tata Motors, India Integrity Understanding Excellence Unity Responsibility Big Modern Reliable DWCV, Korea

33 Towards building World Class Competencies
4. International Business C. Inorganic Growth – TATA Daewoo brand received very well in Korean market

34 Towards building World Class Competencies
4. International Business C. Inorganic Growth – Increase in TDCV Revenue & Market Share TDCV Revenue TDCV Market Share in Korea TML 1.5X 1.2X X FY FY FY 05-06 Heavy Trucks TDCV Sales (Nos) DWCV Acquisition TML 1.3X 13.5% Medium Trucks X X Introduced in Jan’06 Exports FY FY FY 05-06

35 Towards building World Class Competencies
4. International Business C. Inorganic Growth – Learning from Daewoo helped in our 2nd acquisition - Hispano Hispano buses Sales (Nos) 3.5X TML X Q Q Q Q Q4 Revenue 4X X Q Q Q Q Q4

36 Towards building World Class Competencies
4. International Business TATA Motors International Business template To be seen as a local Company in the country of operation As a South Korean Company in South Korea As a South African Company in South Africa As a Spanish Company in Spain Brand ‘Japan’ - Electronics, High Tech, Innovative, Efficient, Trendy, Process oriented Brand ‘Germany’ - Automobiles, Engineering excellence, robust design, heavy duty, meticulous Brand ‘India’ - ?

37 Building World Class Competence
Offsetting cyclicality & de-risking business model Increasing Competitiveness Product Development Supply Chain Marketing & Sales International Business Human Resources Performance Systems

38 Organizational Structure
Towards building World Class Competencies 5. Human Resource 1. Right People Awarded India’s Best Employer 2004 Customer focus Quality focus Cost focus Innovation Agility 2. Challenging assignments / International exposure 3. Meritocracy 4. Changes in Organizational Structure Hierarchical Organizational Structure Cross Functional Team Cross Functional Team Cross Functional Team

39 Building World Class Competence
Offsetting cyclicality & de-risking business model Increasing Competitiveness Product Development Supply Chain Marketing & Sales International Business Human Resources Performance Systems

40 Towards building World Class Competencies
6. World Class Performance Systems Tata Business Excellence Model (TBEM) Leadership Strategic Planning Customer & Market Focus Information, analysis & KM Human resource focus Process management Business Results Balanced Score Card Financial & Business perspective Customer perspective Process perspective Learning & Growth perspective Awards & Recognitions JRD QV TBEM Award for CII-EXIM Bank Award for Business Excellence for ‘Hall of Fame’ for 2003 for effective deployment of BSC 2 Case studies published in ‘HBS Review’ on BSC deployment at Tata Motors

41 Contents Overview Building World Class Competence Results

42 Business Results 1. Negative Net Working Capital
(Days of Sale) 2. Low Debt/Equity Ratio

43 TML Market Capitalization (USD Bn)
Business Results TML Sales 454,300 (’05-06) TML Turnover (USD Bn) 400,000 220,000 170,000 TML PBT (USD Bn) & EBIDTA Margin (%) TML Market Capitalization (USD Bn) Ford GM TML (NYSE 19 Apr’06) TML 13.3% 12.7% 0.3 TML (#1) Maruti 5.7 M&M ALL (BSE 31 Mar’06) 3.9 7.2% 0.1 0.9 Mar’02 Mar’04 Mar’06 (0.1) EBIDTA (%) 1 USD = Rs 44

44 Thank You


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