Tata Nano’s Value Chain Explained
The Tata Nano is a major breakthrough, enabling families that never had the means to purchase a car to do so. “At the car unveiling Mr. Tata said: “I observed families riding on two-wheelers – the father driving the scooter, his young kid standing in front of him, his wife seated behind him holding a little baby”” (BBC). On the company website Tata says, “I hope this changes the way people travel in rural india. We are a country of a billion and most are denied connectivity” he said. “This is a car that is affordable and provides all-weather transport for the family” (2010).
Tata cut costs by minimizing components, particularly steel, and taking advantage of India’s low production costs. Because of its size, it uses less sheet metal, has a smaller and lighter engine than other cars, smaller tube-less tyres and a no-frills interior. The company has applied for 34 patents to cover its innovations. “We shrunk it, made the engine smaller and used fewer materials but we haven’t taken any shortcuts in term of safety or emissions,” Mr Tata said. On the company web site they journal the whole process from start to finish. It is worth reading to see how they managed to do it. The link is following:
This for £1,300 . . .
Top speed 65mph
Engine rear-mounted 623cc, 33bhp multipoint fuel injection engine
Transmission continuous variable transmission
Fuel consumption 50mpg
Body sheet metal with crumple zones
steering, one windscreen wiper Extras air conditioning and airbag optional. No radio, no power (Times).
It started with a vision, a seemingly impossible accomplishment. Yet, Mr. Tata was a dreamer; a business man with a mind to perceive business solutions to social problems. Through reading the company journal, you realize he never gave up. He continued to push for an extremely affordable, yet nice car. In fact, the brief on the car was, “the vehicle should be attractive to customers without any compromises on quality and performance” (2010). Mr. Tata held to that. The engineers had to work through each stage of the car making process to try and radically lower the price.
It took lots of innovation, creativity and perspiration. Leaving nothing unturned, the team debated on many issues involving the creation of the car: were doors necessary, could plastics be used instead of metal, could interiors be cut to a minimum, could a low power engine work. The team had to balance between the lowest price and what the customer wold accept as a minimum (2010). In other words, what is the customer willing to sacrifice for price, and where does that stop?
These are essential questions that we, as social entrepreneurs, need to be asking ourselves.
Don’t just do what everyone else is doing. Scrap and re-invent the whole process. If we can do this we potentially reach billions of people in under-served markets; the so called bottom of the pyramid. This isn’t only an INCREDIBLE economical opportunity, but a great socially impacting opportunity.