Why Tata Nano failed to create a blue ocean despite its stunning debut

Similarly, the Indian automobile industry in the 2000s also presented a huge blue ocean opportunity. While the passenger car market was crowded with automakers from around the world, it was a tiny market considering India’s huge population. The two-wheeler (scooter) market was five times as big. And 90 percent of Indian families did not even own a scooter and relied on public transport for their daily mobility needs. Despite their aspiration for better social image and status, buying a passenger car was just not an option for most Indian families given the prohibitive price; an entry-level car could cost five times as much as a scooter. Moreover, car dealerships and repair shops were only really available in big cities, making it difficult for people living in smaller cities and towns to access them. Automakers, while competing fiercely in the passenger car market, missed the potential mass market of Indian buyers seeking a decent means of personal transportation.

Here, the first-tier noncustomers were those who purchased existing passenger cars but remained dissatisfied and waited for something better. In contrast, the second-tier and third-tier noncustomers were two-wheeler buyers and the 90 percent of Indian families who did not even own a scooter, respectively.

Nano mostly reached existing car owners in big cities who were looking to buy the Tata Nano as a second car for its cheap price.

By observing what these noncustomers valued, the Indian auto manufacturer Tata Motors identified a path for blue ocean creation: The Tata Nano, unveiled in 2008, presented a safe, fuel-efficient, low-pollution and all-weather form of transport at the price of a scooter for the mass population of India. What’s more, the company had a plan to distribute the Nano through the Tata Group’s retail networks, partner banks and post offices instead of through dealerships in big cities, thereby easily reaching two-wheeler riders in smaller cities and towns. These individuals longed for an upgrade of their socioeconomic status but were reluctant to walk into the daunting and luxurious car showrooms.