Friday (Tomorrow) : Extra Class in lieu of the class on 6/11 Time: 10.30 am to 11.15 am Next Case: Spencer’s Tyre (Saturday).

Group write-ups are expected to be in.

BAJAJ AUTO CASE I . DOMESTIC MARKET 2. EXPORT MARKET

This is a case on: 1. Different Orientations to 2. the Market, of the Application Marketing Mixamong the Mix Elements? Was there Synergy Strategy (4Ps) 3. Application of Environmental Factors,
(You should examine the implications)

4. Application of Marketing
Strategy Alternatives.
•Market Penetration •Market Expansion •Product Development, Diversification Strategies) (At what stage did Bajaj Ltd. change from one

Restrictive Import Policies. • Regulations governing Foreign Exchange.BAJAJ AUTO’s EXPOSURE TO ENVIRONMENTAL FACTORS 1950’s-1980’s: GOVERNMENT POLICY OF EXCESSIVE REGULATION INDUSTRIAL DEVELOPMENT POLICY AVOID OVERCAPACITY TO •Marketing Implication Pent up Consumer need for Transportation • Regulations governing Product. . Licenses required for production Capacity Restriction because of Capital Scarcity • Regulations governing Technology.

1960’s: Decade of Indigenization. Long Waiting lists. Initial 1969 Government from Piaggio. Demand more than supply. Local Assembly with parts Policy Regulations restricted in Vespa scooter were only 26%. Vespa Brand 1959: Bajaj obtained a License to Produce in India. Up till 1969 it was a SELLERS MARKET (for 22 years).EFFECT OF INDUSTRIAL POLICY ON BAJAJ AUTO BACKGROUND LTD. averaged 10 . Componentsincrease in production capacity. Plant set up in Akurdi (Pune). Establishment of Dealer network in India. 1960: Technical Collaboration with Piaggio to Manufacture Vespa Brand in India. 1950-1956: Initial Imports of Scooters & 3Wheelers from Piaggio (Italy).

Market Orientation during this period? Application of the Selling Concept. It was a Protected seller’s was Bajaj Auto’s What market. Protected market for BAL. It was a Selling Orientation. .. Largest market share.DEMAND STATE: Demand outstripped capacity. 1971: New Government Regulations prohibited continuation of Bajaj-Piaggio Alliance. (Take it or leave it attitude in a seller’s market).

• Second Plant set up in Waluj (Aurangabad). It was a Production Orientation.SHIFT IN 1980’s What was BAL’s Market Orientation during this stage? Application of the Production Concept. 1980’s-1990’s Government Policy Changed. • Lifting of Manufacturing capacity constraints. Production Operations in 2 shifts . • Lifting of Restrictions.

. no) 1990-1995 ECONOMY IN RECESSION • Recession of Indian economy in early 1990’s • Inflation occurred simultaneously. Production Orientation. • High Interest rates from Banks. •Market saturation. •Overcapacity in industry. • Consumers felt the pinch. Decline in This was the result of the Purchasing Power. Inflation Rate = 13% average for these five years.1990’s DECADE Market demand fell. 1991-1992 Decline in Domestic Demand by 5% (See pg.

MARKET TASTES: Consumer tastes were changing Value for money plus Visual appeal 2. Competition from Japanese two-wheeler Auto’s Marketing manufacturers. ENTRY OF COMPETITORS COMPETITION: 6 Competitors All had technical collaboration with foreign companies. What was Bajaj Orientation at this stage? Shift to the Customer Orientation. (Here we can apply the Characteristic Criteria of the Marketing Concept) . Application of the Marketing Concept.Changing trends … 1993: 1.

4. 2. PROFITABILITY Profits through customer CONCEPT .Here we can apply the Characteristics of THE MARKETING CONCEPT Were these being fulfilled by BAL? These are the FOUR PILLARS OF THE MARKETING 1. No company can operate in all markets. TARGET MARKET: First the company must identify and define the target market. The various marketing functions must work together. CUSTOMER NEEDS: What is the customer’s need? Customer oriented thinking require defining customer needs from the customer’s point of view 3. INTEGRATED MARKETING All departments work together to serve the customer’s interests.

THE SOCIETAL MARKETING CONCEPT IMPLICATIONS: …social and ethical considerations into marketing profits.Eventual Shift in 1990’s to: For Bajaj Auto: Legislation on Auto Emission Standards To deliver customer needs/wants/interests more effectively and efficiently than competitors but in a way that enhances consumers and society well being. .

Is there a Difference between Societal Marketing and Green Marketing? OVERLAP THERE IS AN SOCIETAL MARKETING CONCEPT: A Product/Service must be beneficial to consumers as well as to society. • New Drug Developments (Product) • Anti Polio Campaign (Service plus Idea) ALL SOCIETAL • Drunken Driving (Idea) MARKETING IS NOT GREEN MARKETING GREEN MARKETING: May involve Marketing of a Cause/Idea related to Society plus the Environment: ALL GREEN MARKETING EXAMPLE • Garbage Disposal (Littering) • Green Transportation Methods IS SOCIETAL MARKETING . EXAMPLE • Marketing of Tobacco Products.

BAL 1980’s Starting point Factory Focus Existing products Means Selling and promotion Ends Profits through sales volume This is an application of the Selling Concept BAL 1993 Customer Delivered Value Customer needs Integrated marketing Market Profits through customer satisfaction This is an application of the Marketing Concept .Comparing the Selling Concept and Marketing Concept For Bajaj Auto Ltd.

Factors Influencing a Company’s Marketing Strategy Demographic economic environment Marketing Intermediaries Distributors in Ma fo rk sy rm eti st at ng em io n Product M pl ark sy ann etin st in g em g (Licensing/ JVs Technical/ physical Environment Suppliers Place TARGET Price CUSTOMERS or Ma g r sy ani ket Promotion st z a i n g em tio n or M im ga ar pl niz ke em at tin en ion g ta a tio nd n Publics Political/ Legal environment Competitors Social/ Cultural environment .

What were the Environmental Factors/ Challenges that the company had to encounter in formulating its Marketing Strategy ? • Socio-Cultural • Economic Environment • Political/Legal : Licensing followed by Liberalization (Successive Industrial Policy Changes). • Technology (Infusions through JVs) • Demographic Environment Population size Age groups MARKET SEGMENTS WERE EMERGING Income levels Educational Levels Growth rate of population Regional Distribution Urban Family RURAL /URBAN SEGMENTS Scooters Rural demand Motorcycles .CASE ANALYSIS BAJAJ AUTO Ltd.

Marketing objective: Increase sales to 1 million units. Distribution and Advertising/Promotion Strategy.1993: BAL’s MARKETING STRATEGY Conscious formulation of Marketing Strategy. Pricing Strategy. . Maintain 50% market share Market leadership in all 2 wheeler subcategories (Apply Exhibit 7) MARKETING MIX STRATEGY: Mix of Product Strategy.

The Four PRODUCT •PRODUCT VARIETY Ps Was there Synergy •QUALITY •DESIGN •FEATURES •BRAND NAME •PACKAGING •SIZES •SERVICES •WARRANTIES •RETURNS Decisions to be taken by the Company on: EVALUATING THE MARKETING MIX PLACE •CHANNELS •COVERAGE •LOCATIONS •INVENTORY •TRANSPORT among BAL’s Marketing Mix elements ? PRICE •LIST PRICE •DISCOUNTS •ALLOWANCES •PAYMENT PERIOD •CREDIT TERMS PROMOTION •ADVERTISING •SALES PROMOTION •PERSONAL SELLING •PUBLIC RELATIONS •DIRECT MARKETING .

features • Improved suspension • Better lighting • Improved electrical system • Electronic ignition Collaboration with Kawasaki • Fuel economy • Bajaj Scooter Upgrade program • Product Strategy change to 4 stroke engine • Use of fuel injection technology .To what extent did Bajaj Auto Implement the Marketing Concept? BAL’s PRODUCT STRATEGY (1992) • Product line Expansion: Full line of 2 and 3 wheelers to protect market share (12 models) • Emphasis on Product Improvement • Quality Improvement • Phasing out of old models. Foreign • Emphasis on Styling.

• Extensive Distribution of Spare Parts. • Spare Parts supply through Service/Dealer Network.NESS EAK w as a W This • 800 Service Centres • No Credit Policy for Dealers • Setting up of Regional Depots to improve Availability and reduce lead time 8 Depots • Dealer Satisfaction/Loyalty Competitive Advantage .DISTRIBUTION STRATEGY • 330 Exclusive Dealers • 75 Private Transport Companies • Computerization of Distribution System. Linking of Dealers to BAL Family.

45% Print Advertising • Emphasis in Print Ad on Technical features/Kawasaki Brand Name • Positioning of Product as an investment (Best • Resale Value) • Cooperative advertising Matching Advt/Prom . •Need to Maintain Brand Awareness and Brand Preference •TV Advertising 45% of Total Media Expenditure • Slice of Life Advertising.ADVERTISING/PROMOTION STRATEGY (1992) Advertising as a % of Sales = (1% This was low to compete effectively) • Doubling of Ad Expenditure from 199192 (Still only 1.2%) • Competitive Ad Spend: Competitors also spent 1% of Sales.

PRICING STRATEGY • Retail Price was increased by 7% • Manufacturer Margin 15%. • Dealers 4% • Reasonable Pricing. Low Cost Producer • 50% of Comparable Japanese Motorcycles • Product Emission regulations by Govt •Price premium 15% .

5% 2 wheelers Bajaj Kawasaki 3 wheelers Kinetic: Scooters Mopeds Hero Motorcycles.COMPETITORS (1992) Bajaj Auto: 46. Mopeds LML Only scooters Escort Only Motorcycles TVS Motorcycles.5% (All 2 Wheelers) Others: 53. Mopeds FOREIGN COLLABORATIONS: Bajaj-Kawasaki Kinetic-Honda Hero-Honda LML-Piaggio Escorts-Suzuki .

Here it is necessary to do a . Should Bajaj Auto go for Exports? 3. Bajaj Auto was losing Market Share to Competitors.What were the MARKETING STRATEGY ALTERNATIVES open to BAL? (1992) 1. Room Heaters. (Decline in Domestic Demand) Should Bajaj Auto go for the Rural Market? Population in Rural Areas = 74%. Should Bajaj Auto Diversify into other consumer durables in the Domestic Market? : Fans. Large Growing Market. Geysers. Inference: Scope for Rural Market Penetration. 2. BAL’s Market Share (1992) = 60%.

MARKETING GROWTH STRATEGIES .

Strategy New Markets MARKETING GROWTH STRATEGIES Sales The StrategicIntegrative growth planning BACKWARD/ FORWARD/ HORIZONTAL INTEGRATION gap Intensive growth PRODUCT-MARKET GROWTH STRATEGIES Existing Existing Products Products Expected Sales 0 Two Wheelers 5 10 Time (years) .THE STRATEGIC-PLANNING GAP Desired Desired sales sales Future Sales Diversification Growth New Products.

Product development BAL Three Wheelers PASSENGER CARS New markets 2. Market development Strategy EXPOR T MARKE 4. Three Intensive Growth Strategies: Apply Ansoff’s Product/Market Expansion Grid e Related Technology Unrelated siv n h Technology Existing New Inte owt Gr egies Products Products t a PRODUCT Str NEW MODELS STYLE.. Diversification BAJAJ ELECTRICAL APPLIANCES Cooking Ovens .How could BAL achieve Intensive Growth …. Market penetration Strategy BAJAJ entry into RURAL MARKET SEGMENT 3. BAL Started With Two Wheelers LINE EXPANSION DESIGN IMPROVEMENTS Existing markets URBA N MARK ET 1.

Soft Drinks. Diversification into: •Lifestyle Clothing. .Diversification Strategies may be: • Concentric Diversification: Same or RELATED TECHNOLOGY. •Frozen Foods. Beer. • Horizontal Diversification: Note that Horizontal Diversification is different from Horizontal Integration. Different Products for the Same Consumer market. •Liquor. • Conglomerate Diversification: Entirely DIFFERENT UNRELATED TECHNOLOGY. different product for a DIFFERENT MARKET. (Auto Product Line Extension) UNRELATED TECHNOLOGY. Different products for the same market. Example: Market Diversification Strategy Wills Cigarettes.

. -It is a single business/collection of downsize older businesses. businesses BAJAJ AUTO Ltd SBU’s Example: PMU 1 PMU 2 PMU 3 Product line Extension AUTO UNIT 2 Wheelers 3 Wheelers Cars PMU FINANCE UNIT ELECTRONICS Ovens Heaters Light Bulbs Strategic Business Units SBU’s PRODUCT CATEGORY PMU PMU PRODUCT SUBCATEGORIE S -It has its own set of Competitors.Establish Strategic Business units (SBUs) • Assign resources to SBUs WHAT IS AN SBU? • Plan new business.

100 cc Motor Cycles. SBU 4: Bajaj Auto Finance SBU 5: Bajaj Electronics . 150cc Scooters ALL THESE will all normally comprise one SBU.HOW TO CLASSIFY BAJAJ AUTO’S SBU’S SBU 1: Two Wheelers: 50cc Mopeds. SBU 2: Three Wheelers SBU 3: Passenger Cars These 3 SBUs (Subcategories had different market growth rates).

EXAMPL E BAJAJ AUTO Ltd. BAL SBU 1 BAL SBU 2 BAL FINANCE • Auto FInance BAL SBU 3 Bajaj Auto Ltd CONSUMER PRODUCTS 3 PMU’s (PRODUCT MARKET UNITS) ELECTRONICS • Ovens • Heaters • 2 Wheelers • 3 Wheelers • Cars BAL EXPORTS • Accessories • 2 Wheelers • 3 Wheelers .

It has its own set of Competitors -Own Strategic plan and Profit Performance 1 √ √ SBU SBU 2 3 ? .EXAMPLE : BAL COMPANY SBU’S: PRODUCT PORTFOLIO MATRIX MARKETS SBUs CONSUMER PRODUCTS 2 Wheelers 3 Wheelers Cars FINANCE Auto Loans ELECTRONICS Ovens Heaters Light Bulbs CONSUME INDUSTRIAL EXPORT R /CORPORAT MARKET E MARKET MARKET GOVT MARKET √ Yes SBU √ Yes WHAT IS AN SBU? .A single business/collection of businesses. .

Strategy for Achieving Long-term objectives. .THE PURPOSE OF IDENTIFYING SBU’S IS TO DEVELOP SEPARATE STRATEGIES FOR EACH SBU •Which Businesses to Invest In? (The Investment Portfolio of a Company) Market Opportunity Analysis •Assessing Each Business for Resource Allocation How Much to Allocate each Business Unit (SBU)? •Developing a Strategy/Game Plan for Each Business.

EVALUATING THE SBU’S PRODUCT PORTFOLIO OF A COMPANY This involves identifying and defining the SBU’s (Strategic Business Units) HOW? Apply the BCG MATRIX .

CLASSIFYING SBU’S BY PROFIT POTENTIAL Use of: •BCG MODEL (Growth-Share Matrix) (Boston Consulting Group Method) Growth versus Relative Market Share Relative Market Share= Market Share /Share of Largest Competitor in the business 10%/ 70% .0.3 •GENERAL ELECTRIC MODEL (Market AttractivenessBusiness Strength) GE Model) .14. 10%/ 30%=0.

5x .5x 1x 5 Cash cows ?2 INVEST DIVEST ? ? 1 Dogs 8 6 4x HARVEST 7 .4x .2x .Can we applytheBoston Consulting Group Group Applying the Boston Consulting Model to Bajaj Auto? Growth-Share Matrix 20%18%16%14%12%10%8%6%4%2%0 10x Market Growth Rate Stars HOLD 4 Question marks 3 ? 2x 1.3x .1x MARKET SHARE RELATIVE TO LARGEST Relative Market Share .

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