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FROM FOLLOWER TO MARKET LEADER: STRATEGIC
RECOMMENDATIONS FOR BAJAJ AUTO LTD.
Faculty Contributor: Murali Patibandla, Professor
Student Contributors: Prasoon Agrawal, Deepak Chourasiya, Ranjit Deka, Sourav Kumar, Ravi
Sonthalia
In a competitive environment, a substantial amount of the management’s focus is directed at establishing
their companies as the market leaders. In a concentrated industry where 3-4 major players enjoy a large market
share, such a problem becomes even more important. This article attempts to identify the right strategy that
competitors should adopt to become market leaders, by taking the case of India’s two wheeler industry.
The recommendations are based on the analysis of Bajaj Auto Ltd’s strategy in the last few years.
Bajaj Auto is one of the oldest and the second largest two wheeler manufacutrer in India. In
addition to coping with fierce competition from other players in the two wheeler segment, it
also has to protect its market share from the impending onslaught of low price small cars such
as Tata Nano. Holding on to its postion in such a challenging market environment requires
innovative strategies and deep understanding of consumers needs. The article analyses the two
wheeler market in India and Bajaj's positioning therein. Based on the analysis, the article
proposes the strategic options available to Bajaj.
Exhibit
1. Market Shares of the major players in the two wheeler market segment
The industry exhibits some degree of collusive behaviour and thus represents an oligopolistic
form of market structure. Product and brand differentiation are seen as the primary means of
sustaining competitive advantage. In order to sustain brand equity, players spend large
percentages of their revenues in advertising and brand building activities. The supply and
distribution networks are decisive factors in staying competitive and normally need a huge
capital investment.
The two wheeler industry is capital intensive with large fixed cost requirements and new
model introductions mandatory at frequent intervals in order to sustain the demand. This
involves substantial design and R&D costs. Such high fixed costs can be offset only by
achieving economies of scale. Moreover, developing a distribution channel is extremely
difficult in a country like India. Therefore, it is difficult for a new player to enter this industry.
Penetration Level
The lower the penetration levels in the market, the better the scope for future demand. As the
penetration of the rural market is significantly low, it is going to be a significant long term
growth driver.
Other Factors
Improvement in infrastructure increases competition, while simultaneously improving the
public transport. The average time period taken to replace an existing bike with a newer model
has decreased from 7 years to 5 years, resulting in replacement demand growth.
Conclusion
Through this article we have tried to identify various factors that would impact growth of a
company in two wheeler industry. We reflected on the importance of innovation and consumer
demand. To graduate from being followers to market leaders, companies need to invest in the
right technologies and develop the right products at the right time. Bajaj has shown the
willingness to change and thus has been able to achieve strong sales growth. To further
consolidate its position and gain market share in the industry, Bajaj needs to do strategic
rethinking and assess its product focus. The new strategy should also be backed by efficient on
the ground customer support and continuous research for product innovation.
Contributors
Murali Patibandla is a Professor in the Corporate Strategy & Policy Area at IIM Bangalore.
He is Fulbright Post-doctoral Fellow from the University of California, Berkeley. He holds a
Ph D in Economics from Jawaharlal Nehru University, India. He can be reached
at muralip@iimb.ernet.in
Prasoon Agrawal (PGP 2007-09) holds a B.E from National Institute of Technology,
Allahabad and can be reached atprasoona07@iimb.ernet.in
Deepak Chourasiya (PGP 2007-09) holds a B.E from SGSITS, Indore and can be reached
atdeepakc07@iimb.ernet.in
Ranjit Deka (PGP 2007-09) holds a B.E from MANIT, Bhopal and can be reached
at ranjitd07@iimb.ernet.in
Sourav Kumar (PGP 2007-09) holds a BTech from Indian Institute of Technology, Guwahati
and can be reached atsouravk07@iimb.ernet.in
Ravi Sonthalia (PGP 2007-09) holds a BCom from Delhi University and can be reached
at ravis07@iimb.ernet.in
Keywords
Two wheeler industry, Strategy, Bajaj Auto Limited, Demand growth drivers, Industry
problems
References