Frugal Innovation- Tata Nano Car

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Introduction

Frugal Innovation, also known as Frugal Engineering, refers to a process where the complexity of a product and the cost of a good and its production is reduced. Frugal Innovation is gaining significance all over the world in recent years and especially in the emerging or developing countries as the bargaining power of people is low here and people prefer utilities of good quality and which are cheaper. People in developing countries do not like to go for fancier products, rather they wish to go for better prices. Thus, Frugal Innovation proves to be of immense significance in such countries.
One such example of Frugal Innovation is Tata Nano Car developed in India.

Case study of Tata Nano car

With liberalization in 1991, the world has become a global village. The markets are going for industrialized outputs and there is no regard for innovation. In such a scenario, Tata Nano developed by India’s largest automobile company proves to be an exception. Developed by using the technique of frugal innovation, the car is the cheapest in the world and best serves the needs of India’s market which mainly involves middle and lower-class families. This car is a symbol of the ingenuity of modern India. This could happen because the company understood the needs of the customers in the given economic conditions and rightly gave those needs a shape in the form of a Tata Nano car by undertaking tremendous Research and Development.

The car was invented by Ratan Tata, Chairman of Tata Motors Ltd. He got this idea when he looked at the family of four people on a two-wheeler on wet roads during rainy days. Looking at this innovation, we can say that if the intentions are right then the innovation can be successful. Ratan Tata wanted to create a market for lower-class families who could afford two-wheelers but not a car. This frugal innovation captured a new market and provided security to people from lower strata of the society who had no access to cars. To ensure that car is made low-cost, compact, efficient, and weighs less with a spacious interior, the engine was strapped in the car’s rear, with front-wheel drive and the petrol tank to the front. To ensure less weight of a car, instead of steel, plastic and fiber were used. Frugal innovation means cutting out on fancy things to ensure cost-efficient products and to ensure, no radio, air conditioning, anti-lock brakes, airbags, power windows, power steering, airbags, remote locks, etc. were installed in a car. Though it compromised on the above-mentioned things, it did not compromise on its quality, safety standards, and emission. It enables four adults to sit comfortably.

New methods of advertising were used to promote this product to ensure cost-efficiency. Print medium and radio were used to campaign it. The company utilized a digital platform to its maximum potential to advertise its product. Nano games, Nana conversations on Facebook, Orkut and blogs, Nana chat rooms, Nano pop-ups on major websites launching Nano merchandise like key chains, T-shirts, key chains, etc. were some of the initiatives taken by the company to advertise their product. Advertising of this type as far as cars and vehicles are considered was one of a kind and unique.

For distribution, the company again thought of a unique method. Since people from lower-income groups were not comfortable going to large Tata Motors Ltd. showrooms, the company sold their product through retail and electronics megastores. The company also provided for auto dealerships. 18 preferred bans or Non-Banking Financial Company (NBFCs) provided for the sale of form for booking. The company also took efforts to devise new insurance schemes with five partner insurance companies to make sure that their product gets better and wider reach. This, in turn, enhanced the sales and service network for the product. The company also introduced ‘F Class’ showrooms that is, low-key access sales points. These showrooms used to display just one car. Nano access points were created so that customers get the experience and test-drive the car. This move ensured that the company reached the smaller towns.

We cannot say that the product has always been a complete success. The company has gone through some downhills and the major one was Nano catching fire. However, since the company had due regard for the grievances of its customers, it installed additional safety features like retrofitting exercises in the 70,000 Nanos already sold. In this way, the company managed to win back the trust of its customers.

Thus, we can say that no business model can be a complete success. But if one undergoes proper R&D and takes into consideration the market demands, works on their implementation, and provides good service to the customers, such products are likely to be a success.

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