SWOT ANALYSIS of TATA Motors

SWOT Analysis

It is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favourable and unfavourable to achieving that objective. SWOT Analysis company profile is the essential source for top-level company data and information. Tata Motors Limited - SWOT Analysis examines the company’s key business structure and operations, history and products, and provides summary analysis of its key revenue lines and strategy.

SUMMARY

This comprehensive SWOT profile of Tata Motors Limited provides you an in-depth strategic SWOT analysis of the company’s businesses and operations. It brings to you a clear and an unbiased view of the company’s key strengths and weaknesses and the potential opportunities and threats. Provides all the crucial information on Tata Motors Limited required for business and competitor intelligence needs.

STRENGTH

n  Tata motors is a market leader in Automobile Industry with high market share.

n  Tata Motors Company have huge employee base.

n  Tata motors produce low price car with low fuel consumption.

n  Tata motors is the reputed brand in Indian Industry.

n  Tata Motors Limited is India’s largest automobile company.

n  Tata Motors has been aggressively acquiring foreign brands to increase its global presence. Ownership of heritage of British motor brands like Land Rover and Jaguar.

n  Tata’s management is strengthened by the collective experience of its partners and acquired companies – this includes general management, marketing, sales and operations.

n  Managerial Expertise – Experience of CEO, CMO & CFO.

n  Successful New Products launched in last 5 years.

n  Strong financial condition.

n  The research and development team of TATA motors is very strong.

WEAKNESS

n  Despite buying the Jaguar and Land Rover brands (see opportunities below); Tata has not got a foothold in the luxury car segment in its domestic, Indian market.

n  Return on Investment on TATA motors shares in low.

n  Most of the automobiles Tata manufactures are based on older platforms.

n  Missing some key skills/competencies.

n  Low level of stocks in times of peak sales.

n  Poor Product Design.

n  No clear Strategic Direction.

n  Weak marketing skills.

OPPORTUNITIES

n  TATA motors can take the advantage of their low cost car by entering into third world countries where people have low purchasing power.

n  Joint ventures in other countries allow TATA motors to easily enter into new market.

n  TATA motors should focus in developing luxury cards.

n  Acquisition of rivals.

n  The Nano could sell well in other geographic markets. Expanding markets such as China may find the Nano just the answer.

n  Favourable Government Policy

n  Expanding to New Geographic Areas

n  Expanding Product Line.

THREATS

n  Rising prices in the global economy could pose a threat to Tata Motors Limited on a couple of fronts. The price of steel and aluminum is increasing putting pressure on the costs of production.

n  Since the company has focused upon the commercial and small vehicle segments, it has left itself open to competition from overseas companies for the emerging Indian luxury segments.

n  Slow Market Growth

n  Rising Raw Materials Cost.

n  Entry of Potential New Competitors.

n  Powerful competitors for the luxury market including Honda, Toyota, Ford and Mercedes-Benz are pushing into the Indian market.

CONCLUSION

Tata motors is market leader in Automobile Industry with high market share. And manufacturing low price car with low fuel consumption But they have few weaknesses in domestic market. TATA Motors should come in Luxury segment with new strategies in domestic market. Safety standards should also be taken.Tata Motors Limited - Strategy and SWOT Report, is a source of comprehensive company data and information. The report covers the company’s structure, operation, SWOT analysis, product and service offerings and corporate actions, providing a 360° view of the company.The 'Tata Motors Limited: Company Profile and SWOT Analysis' contains in depth information and data about the company and its operations. The profile contains a company overview, business description, financial ratios, SWOT analysis, key facts, information on products and services, details of locations and subsidiaries, plus information on key news events affecting the company.

What is Cost Sheet?

COST SHEET
For determination of total cost of production a statement showing the various elements of cost is prepared. This statement is called as a ‘statement of cost’ or ‘cost sheet.’ Cost sheet is a statement, which provides for the assembly of the detailed cost of the total cost of job operation or order. It brings out the composition of total cost in a logical order, under proper classifications and sub-divisions. The period covered by the cost sheet may be a week, a month or so. Separate columns are provided to show the total cost and cost per unit. In case of multiple products a separate cost sheet may be prepared for each product. Alternatively, separate columns of total cost and unit cost may be provided for each product in the same cost sheet. A cost sheet is prepared under output or unit costing method.

Purposes of cost sheet:
Cost sheet serves the following purposes: 
1. It gives the break up of total cost under different elements.
2. It shows total cost as well as cost per unit
3. It helps comparison with previous years.
4. It facilitates preparation of tenders or quotations
5. It enables the management to fix up selling price
6. It controls cost.

DIVISIONS OF COST

Prime Cost:It comprises of all direct materials, direct labour and direct expenses. It is also known as flat cost.
Prime Cost = Direct Materials + Direct Labour + Direct Expenses.

Works Cost:It is also known as factory cost or cost of manufacture. It is the cost of manufacturing an article. It includes prime cast and factory expenses.
Works Cost = Prime Cost + Factory Overheads

Cost of Production:It represents factory cost plus administrative expenses
Cost of Production = Factory Cost + Administrative expenses

Total Cost:It represents cost of production plus selling & distribution expenses
Total Cost = Cost of production + Selling & distribution - expenses

Selling Price: It is the price, which includes total cost plus margin of profit or minus loss, if any.
Selling Price = Total Cost + Profit (-Loss)

Selling price for any commodity is determined by analyzing all the factors such as expenses, cost, profit margin etc.

Some of the terms related to selling prices are:

• Purchase Price: It is the cost price – the price you pay to buy the product

• Mark-Up: It is the amount you add to the purchase price to get the selling price

The formula for calculating a selling price is:

Selling price = Purchase price + Mark-Up

In order to determine the cost of sales it is necessary to consider a number of issues in this calculation, such as the freight in, which refers to the cost of freight on the goods purchased. In businesses where goods are manufactured, other expenses that appear in the cost of goods sold may include raw materials, manufacturing expenses, manufacturing labour.

Another major factor considered in order to determine selling price is the gross profit as it shows how much money we made from our trading activities.

The calculation used to determine gross profit is:

Gross profit = Sales Revenue - cost of goods sold

 After calculating your gross profit, your next step is to calculate your operating expenses. Operating expenses are expenses that a business incurs in its day-to-day operation.  Some examples of operating expenses include: Accounting fees, advertising, power, rent, vehicle expenses, wages, insurance, telephone, maintenance etc.

Net profit could be determined by subtracting operating expenses from gross profit. This is calculated in a profit and loss account. The profit and loss account is a financial report showing the gross profit, from the trading account, less the operating expenses to produce a net profit for the period.

Based upon above theory explained we would analyze the case of food industry in which how hotels determine the price on the menu cards. The most common standard used in the foodservice industry is a standard recipe. A standard recipe is a written formula used to produce a food or beverage item that uses the same quantity and quality of product and the same method of preparation each time the product is made. Using a standard recipe promotes consistency in product and ultimately leads to customer satisfaction. Having standard recipes and properly training staff to follow the standard recipe in preparation will prevent inconsistency. Standard recipes should be written in edible portion form. If a recipe is prepared using the same quality and quantity of ingredients in their edible form and using a prescribed method of preparation, a standardized and consistent product will always result. 

MEANING OF COST

‘COST’ represents a sacrifice of values, a foregoing or a release of something of value. It is the price of economic resources used as a result of producing or doing the thing whose cost to be determined. It is the amount of expenditure incurred on a given thing. Cost has been defined as the amount measured in money or cash expended or other property transferred, capital stock issued, services performed or a liability incurred in consideration of goods or services received or to be received. By cost, we mean the actual cost i.e. historical cost. ICWA (UK) defines cost as the amount of expenditure (actual or notional) incurred on, or attributable to a specified thing or activity. The object for which the cost is to be determined can be a product or service

CLASSIFICATION OF COST
Cost classification is the process of grouping costs according to their common features. Costs are to be classified in such a manner that they are identified with cost center or cost unit.

On the basis of behavior of cost
Behavior means change in cost due to change in output. On the basis of behavior cost is classified into the following categories:

Fixed Cost
• It is that portion of the total cost, which remains constant irrespective of output up to the capacity limit.
• It is called as a period cost as it is concerned with period
• It depends upon the passage of time.
• It is also referred to as non-variable cost or stand by cost or capacity cost or ‘’period’ cost. 
• It tends to be unaffected by variations in output. 
• These costs provide conditions for production rather than costs of production. 
• They are created by contractual obligations and managerial decisions. Rent of premises, taxes and insurance, staff salaries constitute fixed cost.

Variable Cost
• This cost varies according to the output.
• In other words, it is a cost which changes according to the changes in output. 
• It tends of vary in direct proportion to output. 
• If the output is decreased, variable cost also will decrease 
• It is concerned with output or product. Therefore, it is called as a ‘product’ cost. 
• If the output is doubled, variable cost will also be doubled. For example, direct material; direct labour, direct expenses and variable overheads. 

Semi-variable Cost
• This is also referred to as semi-fixed or partly variable cost.
• It remains constant upto a certain level and registers change afterwards. 
• These costs vary in some degree with volume but not in direct or same proportion. 
• Such costs are fixed only in relation to specified constant conditions. For example, repairs and maintenance of machinery, telephone charges, maintenance of building, supervision, professional tax etc.

On the basis of elements of cost 
Elements means nature of items. A cost is composed of three elements: material, labour and expenses, Each of these three elements cab be direct and indirect.

Direct Cost
It is the cost, which is directly chargeable to the product manufactured, it is easily identifiable. Direct cost consists of three elements, which are as follows:

Direct Material
• It is the cost of basic raw material used for manufacturing a product. 
• It becomes a part of the product 
• No finished product can be manufactured without basic raw materials 
• It is easily identifiable and chargeable to the product 
• For example, leather in leather wares, pulp in paper, steel in steel furniture, sugarcane for sugar etc 
• What is raw material for one manufacturer might be finished product for another. 

Direct material includes the following:
1. All materials specially purchased for production or the process.
2. All components purchased for production or the process.
3. Material transferred from one cost center to another or one process to another.
4. Primary packing materials, wrappings, cardboard boxes etc., necessary for preservation or protection of product.
5. Some of the items like nails or thread in the store are part of finished product. They are not treated as direct materials in view of negligible cost.

Direct Labour or Direct Wages
• It is the amount of wages paid to those workers who are engaged on the manufacturing line of conversion of raw materials into finished goods. 
• The amount of wages can be easily identified and directly charged to the product These workers directly handle raw material, wip and finished goods on the production line 
• Wages paid to workers operating lathers, drilling, cutting machines etc. are direct wages 
• Direct wages are also known as productive labour, process labour or prime cost labour. 
• Direct wages include the payment made to the following group of workers:
1. Labour engaged on the actual production of the product.
2. Labour engaged in aiding the operations viz. supervisor, Foreman, Shop clerks and workers on internal transport.
3. Inspectors, Analysts needed for such production

Direct Expenses or chargeable Expenses
• It is the amount of expenses which is directly chargeable to the product manufactured or which may be allocated to product directly 
• It can be easily identified with the product. For example, hire charges of a special machine used for manufacturing a product, cost of designing the product, cost of patterns, architects fees/surveyors fees, or job cost of experimental work carried out especially for a job etc. 
• Cost of special drawings, cost of special layout designs, patents, patterns, cost of models, surveyors fees, Excise duty, Royalty on production cost of rectifying defective work. Utility of such expenses is exhausted on completion of the job.


Indirect Cost
It is that portion of the total cost, which cannot be identified and charged direct to the product 
It has to be allocated, apportioned and absorbed over the units manufactured on a suitable basis.

Indirect Material
• It is the cost of material other than direct material which cannot be charged to the product directly.
• It cannot be treated as part of the product. 
• It is also known as expenses materials.
• It is the material which cannot be allocated to the product but which can be apportioned to the cost units.

 Examples are as follows:
1. Lubricants, cotton waste, Grease, Oil, stationery etc.
2. Small tools for general use.
3. Some minor items which as thread in dress making, cost of nails in shoe making etc.

Indirect Labour
• It is the amount of wages paid to those workers who are not engaged on the manufacturing line, for example, wages of workers in administration department, watch and ward department, watch and ward department, sales department, general supervision.

Indirect Expenses
• It is the amount of expenses which is not chargeable to the product directly 
• It is the cost of giving service to the production department 
• It includes factory expenses, administrative expenses, selling and distribution expenses etc.


OVERHEADS OR ON COST OR BURDEN OR SUPPLEMENTARY COST

Aggregate of indirect cost is referred to as overheads. It arises as a result of overall operation of a business. According to Weldon over-head means ‘the cost of indirect material, indirect labour and such other expenses, including services as cannot conveniently be charged direct to specific cost units. It includes all manufacturing and non-manufacturing supplies and services.

This cost cannot be associated with a particular product. The principal feature of overheads is the lack of direct tractability to individual product. It remains relatively constant from period to period. The amount of overheads is not directly chargeable i.e. it had to be properly allocated, apportioned and absorbed on some equitable basis.

Classification of Overheads
1.Factory Overheads: 
• It is the aggregate of all the factory expenses incurred in connection with manufacture of a product 
• These are incurred in connection with running of factory 
• It includes the items of expenses viz., factory salary, work manager’s salary, factory repairs, rent of factory premises, factory lighting, lubricants, factory power, drawing office salary, haulage (cost of internal transport) depreciation of plant and machinery unproductive wages, estimation expenses, royalties loose tools w/off, material handling charges, time office salaries, counting house salaries etc.

2. Administrative Overheads or Office Overheads: 
• It is the aggregate of all the expenses as regards administration 
• It is the cost of office service or decision making 
• It consists of the following expenses: Staff salaries, office premises, office conveyance, printing and stationery and repairs and depreciation of office premises and furniture etc.

3. Selling and Distribution Overheads: 
• It is the aggregate of all the expenses incurred in connection with sales and distribution of finished product and services 
• It is the cost of sales and distribution services.
• Selling expenses are such expenses, which are incurred in acquiring and retaining customers. It includes the following expenses:
a) Advertisement b) Show room expenses c) Traveling expenses 
d) Commission to agents) Salaries of Sales office f) Cost of catalogues 
g) Discounts allowed h) Bad debts written off i) Commission on sales 
j) Rent of Sales Room

4.Distribution expenses 
 It includes all those expenses, which are incurred in connection with making the goods available to customers. These expenses include the following:
a) Packing charges b) Loading charges c) Carriage on sales d) Rent of warehouse e) Insurance and lighting of warehouse f) Insurance of delivery van g) Expenses on delivery van h) Salaries of Godownkeeper, drivers and packing staff.

DETERMINATION OF TOTAL COST
Cost of product is determined as per cost attach concept. Total cost of a product consists of various elements of cost, which have the quality of coherence. All the elements of cost can be grouped and regrouped. Grouping and re-grouping of the various elements of costs leads to significant divisions of cost. 

NON-COST ITEMS
Non-cost items are those items, which do not form part of cost of a product. Such items should not be considered while ascertaining cost of a product. These are items included in profit and loss A/c as per principles of Financial Accountancy but not related to product. For example, Income-tax paid, provision for Income-tax, interest on capital, interest on loan, profit on sale of fixed assets, loss on sale of fixed assets, transfer fees received, transfer to reserves, any other appropriation of profit, commission to Managing Director or Partners, capital loss, donations, capital expenditure, discount on shares and debentures, Goodwill written off, Preliminary expenses written off, brokerage, pure financial expenses or losses and expenses not related to the business, wealth tax, bonus to directors and employees, if it is based on profit, expenses of raising capital, penalties and fines.

GENERIC STRATEGIES OF LG

Generic strategies are guidelines about what the content of a firm’s strategy should be. There are very limited choice of options, while others give a list of practices that are sustained to lead to higher performance.

Generic strategies for LG are as follows:-

(1)Cost Leadership Strategy

(2)Differentiation Strategy

(3)Focus Strategy

 

                                             

COST LEADERSHIP

Firms that endeavour to become the lowest-cost producers in an industry can be stated to as those following a cost leadership strategy. The firm with the lowest costs would receive the highest profits in the event when the competing goods are essentially indistinguishable, and selling at a standard market price. There are some companies which follow this strategy, which place importance on cost reduction in every activity in the value chain, LG practice this strategy to some extent but basically is following the differentiation strategy. Examples of companies following a cost leadership strategy include EasyJet, in airlines, Tesco, in superstores etc.

The threat of following the cost leadership strategy is that the firm's attention on reducing costs, even sometimes at the cost of other vital factors, may become so main that the company loses vision of why it boarded on one such strategy in the chief place.

DIFFERENTIATION 

When a firm differentiates its products and services, it is able to charge a premium price for its products or services in the market. Examples of differentiation may include better product performance, better service levels to customers etc., in contrast with the prevailing rivals. For a company like LG, employing a differentiation strategy, means there would be extra costs that the company would have to incur. Such additional costs may include high advertising costs to promote a differentiated brand image for the product. For example, McDonalds is differentiated by its very brand name and brand images of Big Mac and Ronald McDonald.

Differentiation results in providing many advantages for the firm which makes use of this strategy, just as in the case of LG. Moreover, successful differentiation strategy of LG has resulted in attracting different firm may to enter the company's market segment and copy the differentiated product.

FOCUS 

Focus can be deliberated as a mediator of the above two strategies. Some companies also employ this strategy by aiming on the areas in a market where there is the least amount of rivalry. Firms can also make use of the focus strategy by aiming on a definite niche in the market and proposing specialised products for that niche. This is why often the focus strategy is also denoted to as the niche strategy.

This strategy provides the company the possibility to charge a premium price for superior quality (differentiation focus) or by offering a low price product to a small and specialised group of buyers (cost focus). A company's failure to make a choice between cost leadership and differentiation implies that the company is trapped in between. Company stuck in the middle will result in poor financial performance and hence no competitive advantage.

LG ELECTRONIC’S GENERIC STRATEGY:-

Differentiation: High-end rather than low price. In spite of adhering to its previous strategy i.e low cost leadership, LG Electronics has chosen to focus primarily on a high-tech look and feel backed by high performance. This strategy has made it possible for LG to achieve a world-beating profit margin and to help nurture its brand image as a premium brand. In the high-end market segment, which is highly concentrated, LG needs to find effective means to differentiate itself from its key competitors so as to succeed in the fierce competitive environment. Given this scenario, LG’s excellence in industrial design will play a key role in the company’s short-term as well as long-term strategy. Innovative and cutting-edge design will be crucial for LG’s differentiation strategy by launching stylish handsets, perceived as unique by the community of mobile users.

In the low-end market segment (both developed and developing countries), consumer price sensitivity is one of the key drivers to be able to successfully compete. But at the same time, LG has to take advantage of its level of design differentiation from its competitors. LG’s innovation strategy for this specific segment will be supported by two of its elements: cost focus (price-based) and differentiation.

How product portfolio of LG is built around core competencies

TECHNOLOGICAL DEVELOPMENT:

Technology lives at the very core of what LG does. With continuous technological development and innovation LG has provided the best experience to its customers.

MOBILE PHONES:

LG has used latest technology and it has successfully launched mobile phones that virtually put our desktop in our pocket.

The new LG Optimus 7 is a proof of superior viewing. It offers remarkable view and great readability.

TV/AUDIO/VIDEO:

LG promises a television experience “like never before” to its customers . Here we can discover 3D cinema, experience smart televisions, marvel at Blu-ray and home theater systems, and see how pictures get larger than life with projectors. This is all possible because of continuous technological development.

LG Cinema 3D TV offers the best TV viewing experience. LG Magical remote is a simple way of controlling smart TV.

APPLIANCES:

LG offers kitchen, cleaning, laundary and climate control appliances to its customers. LG has designed appliances for all types of spaces. It enjoys unrivalled power by providing cleaning appliances that makes cleaning simpler than before. This has become possible because of technological development and innovation.

COMPUTER PRODUCTS:

LG offers latest computer hardware and computer accessories. LG monitors have advanced technology to meet customer’s requirements.

MARKETING AND SALES:

Another core competency of LG is marketing and sales. LG makes use of effective marketing and sales strategy to boost its sales. The advertisements and other marketing strategies are designed in an appropriate manner which is apt for the product and is able to convey the message to the consumers.

·         LG makes use of mobile stores to display its mobile phones to the customers.

·         LG uses online and digital marketing effectively to promote its products

(facebook,blogs etc.)

Thus we can say that LG has been using its core competency effectively and the product portfolio of LG is built around its core competency.