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Strengths: Highly experienced management. Product design and development capabilities. Extensive R & D focus. Widespread distribution network. High performance products across all categories. High export to domestic sales ratio. Great financial support network (For financing the automobile) High economies of scale. High economies of scope. Weaknesses: Hasn't employed the excess cash for long. Still has no established brand to match Hero Honda's Splendor in commuter segment. Not a global player in spite of huge volumes. Not a globally recognizable brand (unlike the JV partner Kawasaki)
Threats: The competition catches-up any new innovation in no time. Threat of cheap imported motorcycles from China.
Last quarter. All these forced Bajaj to look for an international partner who could bring in technology and also offer some basic platforms to be manufactured and marketed in India. And the immediate inability to support the onslaught of competitors. 2. Bajaj introduced a slew of products right from entry-level motorcycle to the high premium segment right from 2001 onwards. The design know-how. From 1996 to 2000. More maturity and movement towards higher-end motorcycles. This served the purpose of sustaining the market competition for a while. which is the prime reason behind the energetic Bajaj of 21st century. The growing gearless trendy scooters and scooterette market. Untapped market above 180 cc in motorcycles. Bajaj invested hugely in infrastructure while simultaneously developing product design and innovation capabilities. Bajaj entered into a strategic tie-up with Kawasaki in late 1990s to enhance its product line and knowledge up-gradation to support long-term strategies. The technical expertise to deliver competitive goods. 3. Opportunities: Double-digit growth in two-wheeler market. and since then its raining success all the way for Bajaj. The Inevitable Change Bajaj on internal analysis found that it lacked 1. Margins getting squeezed from both the directions (Price as well as Cost) TATA Ace is a serious competition for the three-wheeler cargo segment. Bajaj had . Growing world demand for entry-level motorcycles especially in emerging markets. Kawasaki of Japan is a world-renowned manufacturer of high performance bikes.
. Actively market electric range internationally. BAL has been the pioneer in stretching competition into providing latest features in the price segment by updating the low price bikes with the latest features like diskbrakes. Increase the customer Invest in building world class centric initiatives and bikes to sustain the international command more customer markets independently in the loyalty. Invest in new product platforms. Can invest and grow the life style segments. coming years like WIND 125. etc. internationally. Most of the Bajaj models come loaded with the latest features within the price band acceptable by the market.impressive performance growing at a rate of 20%+ when the largest manufacturer grew at just 6%. External Factors Marketing Strategies The focus of BAL off late has been on providing the best of the class models at competitive prices. Tows Matrix for BAL Internal Factors Strengths Weaknesses Can use the existing R&D Must employ the cash in capabilities for new production and product models. Improve the efficiency of Threats the financing and the insurance arm. This stands a testimony to the various important strategic decisions over the past decade. capabilities to match competitors Can use Kawasaki's and for continuous export Opportunities distribution networks growth. anti-skid technology and dual suspension.
high ground clearance and high mileage were the selling factors and it was in direct competition to Hero Honda Dawn and Suzuki MX100. its approach towards advertising is even more radically different this time around. Bajaj could realize its success . The model was a great success and has already crossed 1 million mark in sales. Discover . The campaign beared innovative punch line of "Definitely Male" positioning Pulsar to be a masculine-looking model with an appeal to the performance sensitive customers. Pulsar .Pulsar was launched in direct competition to the Hero Honda's 'CBZ' model in 150 cc plus segment. executive segment bike buyer). Target was the rural population and the price sensitive customer.The same DTSI technology of Pulsar extended to 125 cc Discover was a great success.First attempt by bajaj to make a mark in the motorcycle segment. Boxer . the campaign was clearly a hit in the 5-10 years age bracket. And though Bajaj made the bike look bigger and feel more powerful than its predecessor (characteristics that will attract the average. So. Bajaj gave the mandate for the ad campaign to Lowe. 25-plus. The Pulsar went one step ahead of Hero Honda's 'CBZ' and launched a twin variant of Pulsar with the 180 cc model. With this. picking them from the clique of three agencies that do promos for the company (the other two being Leo Burnett and O&M). the teaser campaign and the emphasis on the Caliber 115 being a `Hoodibabaa' bike placed it as a trendy motorcycle for the college-goers and the 25 plus executives both at the same time. few of them are discussed below: Kawasaki 4S . The target customer was the father in the family but the target audience of the commercial was the son in the family.It took the reins from where the Kawasaki 4S left.The focus for the Caliber 115 was youth.BAL adopted different marketing strategies for different models. Larger wheelbase. The commercial of Kawasaki 4S had the punch line "Kyun Hero" means "now what hero" which reflected the aggressiveness in the marketing front by the company. Boxer marketed as a value for money bike with great mileage. Going by the initial market response. The time at which Kawasaki 4S was launched Hero Honda was the market leader in fuelefficient bikes and Yamaha in the performance bikes. Caliber .
Bajaj Auto's entire product portfolio. Over the next couple of years. Bajaj Auto also plans to set-up an independent network of dealers for the rural areas. The restructuring will involve separate dealer networks catering to the urban and rural markets as well as its three-wheeler and premium bikes segments. The needs of financing. Bajaj has kicked off a project to completely restructure the company's retail network and create multiple sales channels. the company will set-up separate sales channels for every segment of its business and consumers. Bajaj Auto will need its cash muscle. from the entry-level to the premium. . selling. competition in the two-wheeler market is set to intensify. To fight this battle and retain its hard-earned market share in the motorcycle segment. A look at its own story over the past five years provides valuable insight. Delisting worry: What is worrying is that there is an idea to delist the investment company (also an indirect indication that it would be listed initially). is being sold by the same dealers.riding on the back of technological innovation rather than the joint venture way followed by competitors to gain market share Strategies & Implementation FMCG Business Model BAL now is taking a leaf out of the FMCG business model to take the company to greater heights. Other Strategic Issues Cash is strength: Bajaj Auto has been sitting on a cash pile for over five years now. Over the next few months. distribution and even after-sales service are completely different in the rural areas and do not makes sense for city dealers to control this. The company also plans to set-up exclusive dealerships for its three-wheeler products instead of having them sold through an estimated 300 of its existing dealers. This would be closing the valve of equitable ownership distribution. TVS Motors and Hero Honda are on a product expansion binge.
Of the two-wheeler exports. low trading interest and the need to provide shareholders may be cited as plausible reasons for the buyback. However. Bajaj has identified certain key markets. like in India. 3) Markets where BAL need to enter with existing products and probably with a good distributor or a production facility or a joint venture. Better value proposition: Shareholder interests may be better served if the cash is retained to pursue growth in a tough market. A combination of a large one-time dividend and a regular buyback program through the tender route may offer better value. The latter has been playing an increasingly active role in Bajaj's recent models. close to 90 per cent were motorcycles. Its first overseas office established at the Jebel Ali free trade zone has been the focal point for exports to middle Africa and the Saharan nations. Strategies for the Overseas Markets Bajaj Auto looks at external markets primarily with three strategies: 1) A market where all BAL need to do is distribute through CKD or CBU routes. With the expansion in Bajaj's own range to almost five-six platforms of motorcycles. A strategic stake for Kawasaki would only positively influence the stock's valuation. which hold potential. The company would not be short of cash to put through such a buyback. Stake for Kawasaki: Bajaj Auto's attempt to vest the surplus cash in a separate company may be a prelude to offering a stake to Kawasaki of Japan in the equity of the automobile company. also the reason for its stronger showing. . Egypt and Iran also continue to be strong markets for Bajaj. Factors such as low valuation. Earlier. For the last fiscal. 60 per cent of its exports were two-wheelers and the rest three-wheelers. most of the products that Bajaj exported were scooters and some motorcycles. 2) Markets where BAL need to create new products. in its target markets. and its brand name is also more visible in Bajaj bikes than in the past.There is a hint of a buyback of shares of the investment company as this is the only way it can be delisted. This would also obviate the need to fork-out fancy sums as stamp duty to the government for the demerger. the shift was towards motorcycles. it had a better offering to export.
But two-wheeler market requires great deal of effort from BAL. which would be a focus area. where Bajaj distributors are looking to introduce eco-friendly four-stroke auto rickshaws. Everybody is there with Honda leading the show. in the Philippines. which constitute the third biggest consumer of two-wheelers. . It also wants to develop a new step-through model for the Indonesian market. The other focus area is the ASEAN nations. Kawasaki is marketing the new model. extensive and very well-equipped Research and Development wing geared to meet two critical organizational goals: development of exciting new products that anticipate and meet emerging customer needs in India and abroad. Caliber and Byk. Wind 125. except in Brazil.The other market. developed by both companies. There's Suzuki. Kawasaki. where the company feels it is fairly well represented in most countries. BAL should look at the right product mix for two-wheelers. The two signed an MoU in February. which is a fuel-efficient bike. are also being distributed by Kawasaki. the largest market. Kawasaki. a large multi-product conglomerate. The Bajaj-developed models. Bajaj has also made a beginning by selling bikes in the Philippines branded in the name of its technical partner. This is a good beginning strategically for Kawasaki to evince interest in Bajaj products for markets which can still buy less than 150 cc. The biggest among them is Indonesia. The company recently participated in a large auto exhibition in Brazil and found good consumer acceptance to products like Pulsar and Wind 125. only makes highend bikes and does not have sub-200cc models. sophisticated technologies to scale down product development lifecycles and enhance testing capabilities. the company has also been investing heavily in the latest. is South America. While the manpower strength of the R&D represents a cross-section of indepth design and engineering expertise. but for now it will create a base there with its motorcycle models. Bajaj's Pulsar model has taken off well there. Kawasaki and some Korean and Chinese models. and development of eco-friendly automobile technologies. R&D Bajaj Auto has a huge.
Iran and Egypt. Their margins came under pressure as marketing costs escalated. it also resulted in increased pressure on the companies to concentrate on cost-cuts. In 2001. Bangladesh. Despite the launch of more vehicles. Further. they have built their distribution network over 60 countries worldwide and multiplied the exports from 1% of total turnover in Fiscal 1989-90 to over 5% in Fiscal 1996-97. in Uruguay with 30% of the motorcycle market and in Bangladesh with 95% of the three-wheeler market. Bajaj leads Colombia with 65% of the scooter market. Italy. there was room for a profitable existence for all brands. analysts were skeptical about the segment's ability to maintain the growth rate in the years to come. Sweden. Germany. One of the major assumptions underlying the motorcycles rush was that if the market was considerably large and was growing at a constant pace. the survival prospects of many of the individual brands were deemed to be rather bleak. Sri Lanka. Based on their own brand of globalization. Colombia. the growth in the motorcycle segment was dependant on continuing favorable market conditions. Peru.Bajaj Auto R&D also enjoys access to the specialized expertise of leading international design and automobile engineering companies working in specific areas. there were over 30 motorcycle brands in the market. Argentina. Analysts claimed that to sustain this growth . Moreover. Several new models are being developed specifically for global markets and with these the company will progressively endeavor to establish its presence in Europe too. technology enhancements and upgradations and styling. with the top five brands accounting for more than 60% of the market. The countries where their products have a large market are USA. only 40% of the market was available for all other new brands put together. The companies were forced to reduce prices and offer discounts to survive the competition. However. The Future Although the avalanche of motorcycles offered Indian consumers a wide variety of models to choose from.
Low margin products . Avenger. There was little differentiation between the brands being launched apart from styling as most companies had introduced their four-stroke vehicles. BAL should adopt a deliberate strategy of focusing on executive and premium segment motorcycles and three-wheelers.Pulsar. with high demand from female customers. Analysts also commented that as the two-wheeler industry had grown steadily for eight years. Recommendations Focus on High Margin Products: Around 50% of the two-wheeler consumers buy high quality products (products of executive and premium segment motorcycles). Margins on these products are higher.Platina. followed by the moderately growing moped segment and the restructuring in the scooter segment with major national and foreign players reinforcing their presence. whether the Indian companies would succeed in generating the kind of volumes needed to sustain in the competitive motorcycle market. High margin products . With the failure of the joint ventures.rate. stringent emission norms and threat from major international players. and is reducing its dependence on lower-end of motorcycles and scooters segment. Constrained with the ruling price levels in the market place. Three-wheelers. rather than later and the decline stage would invariably come some day. Mopeds. the survival of indigenous brands looked uncertain. limited infrastructure and lack of technological innovations when compared to their foreign counterparts. it was unlikely that the entire growth in the two-wheeler sector would be due to motorcycles. Scooters. Discover. the expected introduction of cheaper Chinese brands. it is believed this strategy of focusing on higher . Now with increasing competition in the economy segment and limited scope from cost saving measures. Considering the fast growing scooterettes segment. stages in the product life cycle would apply to the field sooner. remains to be seen. the segment would have to completely cannibalize the market for scooters and a considerable part of the market for scooterettes and mopeds.
it needs to look for joint ventures abroad. The advertising should have a fresh look and the product should live up to the Gen-X's expectations. .margin products would enable the company in retaining its operating margins. The company needs to tap the export market more efficiently as there is a huge potential to make India as the world's two-wheelers production base. For this. In view of the new threat posed by Honda Motors in the scooter segment. It needs to target the young age group more effectively as this group is extremely trend savvy. the company needs to review its products line-up and launch new products to cater the changed demand. Below are other useful recommendations: Company should keep focusing on the fast growing motorcycle segment. The company needs to take a look at its ungeared scooters offerings and need to adapt to the latest trends.