CASE 1 BAJAJ DISCOVERS NEW OPPORTUNITIES Even though the domestic motorcycle industry grew by 3 per cent in 2009, Bajaj automobiles regis- tered a negative growth. India’ second-largest two- wheeler manufacturer plans to reverse the trend this year. In order to achieve this, the company will, focus on redesigning its existing range of bikes and will also target the rural market, since the urban market has been registering flat growth. Bajaj Decides to Change Gear Bajaj Auto's decision to exit the scooter business has triggered a wave of nostalgia evoked by Bajaj’s famous “Hamara Bajaj” campaign. Bajaj is keener on the motorcycle segment rather than scooters. “We will exit the scooter market because we don't see much sense in it. If we are to be a motorcycle specialist, we cannot make scooters,” announced Rajiv Bajaj, managing director, Bajaj Auto. The logic does not make much sense. Accord- ing to the Society of Indian Automobile Manufac- turers (SIAM), the scooter segment is booming. ‘The market leader, Honda Motorcycle and Scooter India Pvt. Ltd (HSI), the Indian unit of Japanese Honda Motor Co. Ltd, sold about 1.1 million units this year and is targeting a sale of 1.5 million units next year. Mahindra Two Wheelers Ltd (MTWL), the new entrant, has tasted success by selling 7,020 scooters in November 2009. However, the performance of Bajaj Auto was disappointing. During November 2009, Bajaj Auto sold only 154 units of its “Kristal” scooter. Innovation Neglected Bajaj has to blame its dormant attitude for its fail- ure. While the competitors have taken the innova- tion route and launched upgraded, novel products based on fresh R&D and improved features (such as auto gears), performance and mileage, Bajaj continued with its iconic (but now defunct) geared scooters. A meek attempt at innovation was seen in case of the 100 cc gearless “Kristal,” the features of which are hardly on par with what the competitors are offering. The indifferent and insensitive attitude of Bajaj Auto led to the unnatural and untimely death of its scooter segment. Re-entry into the 100 cc Segment Bajaj did exit from the 100 cc motorcycle segment after failing to catch up with market leader Hero Honda. Though the market share of 100 cc bikes has declined from 80 per cent to 65 per cent, the decline has not occurred as fast as Bajaj expected. Bajaj has a meagre 9 per cent market share in this segment while it was a market leader in 125 cc+ segment. The fact that Hero Honda is doing well amidst recession can be attributed to the booming sales of its 100 cc bikes in the rural market. Indian Market—Preferences India’s market is divided roughly into two cate- gories, urban and rural, depending on the needs and resources of consumers in these areas. For example, pricing and fuel efficiency matters most for rural consumers whereas the urban consumer would prefer more power and style in a motorcy- cle. In an effort to capture the younger, tech-savvy urban consumer market, Bajaj ignored the rural market and did not launch any new variant in the 100 cc segment in the past two years. Rediscovered Opportunity In light of this, Bajaj is revamping its portfolio and has already launched nearly half a dozen bikes544 Rural Marketing in 2009. Bajajs Pulsar brand found strong association with sports lovers. Focusing on the domestic sports segment, Bajaj launched Pulsar 220 and another variant, the Pulsar 135 LS. ‘The latter is powered by a 4-valve DTS-i engine and is priced at Rs 51,000 (ex-showroom Delhi). At the lower end, Bajaj has Platina, a 100 cc motorcycle. In addition to this, the new 100 cc Discover DTS- Si motorcycle has been launched. Discover—New Driver According to ARAI-IDC (Indian Driving Cycle), Discover returns a fuel efficiency figure of 89 km/l. Under standard conditions, fuel effi- ciency is expected to be around 125 km/I, higher than the XCD 109 km/I. Bajaj is yet to get the ARAI figures under standard conditions. The new 100 ce Discover has “Digital Twin Spark Swirl Induction,’ a 2.0 version engine and other features including electric start, nitrox suspen- sion, longest wheelbase in the 100 cc segment, 5-speed gear—a first in the 100 ce segment—and maintenance-free battery. It is expected that with rising fuel prices the bike would hold relevance for cost-conscious cus- tomers. It is available in three colours—black with green stripes, black with red stripes and black with blue stripes. Bajaj Discover 100 cc comes in only one variant and is priced Rs 40,000 (ex-showroom Chennai). Discover will be available in showrooms across India. Bajaj is aiming to increase its domestic monthly sales of motorcycles to 0.15 million from the existing 0.11 million per month through the launch of new products, Products such as 100 cc Discover DTS-Si could well attract the attention of prospective buyers in rural areas. The com- pany could put the thrust on providing financing schemes to their customers in rural areas both via in-house financing, i.e. Baja Auto Finance Limited, as well as making finance available through other financing sources as well. Bajaj will promote its new bike as a long- distance bike and is going to do a series of outdoor promotional activities. “Rediscover India with Discover 100 cc” would be the message of the cam- paign. As part of the campaign, Bajaj will take its customers from cities to suburbs to highlight the mileage of the bike. DISCUSSION QUESTIONS 1. Did Bajaj pay a huge price for ignoring the rural market? 2. Is Bajaj’ decision to exit the scooter segment a wise one? 3. Do you think it can tame the 100 cc segment this time? 4, What are the strategies that Bajaj can use to compete with Hero Honda? Source: Sucheta Dalal, “Bajaj Auto: Will History Repeat Itself Time and Again?” 14 December 2009, available at wwwsuichetadalal com/tid=ae206ca0-d75f-2e0f-4b2601282del &base=sections&, “Bajaj Auto Targets Growth in Motorcycle Market? Business Standard, 18 July 2009, available at wwwcbusiness-standard, com/india/news/bajaj-auto-targets-growth-in-motorcycle- market/68161/on.