You are on page 1of 19

SYMBIOSIS INSTITUTE OF MANAGEMENT STUDIES

(Constituent of Symbiosis International University)

Business Environment
MBA 2017-19
PESTLE analysis: Bajaj Auto Ltd.

Submitted To,
Dr. Arjun Madan

Submitted By,

Name Roll Number


Pawankumar Dihiye D-18
ACKNOWLEDGEMENT
I would like to confer my heartiest thanks to my coordinator of Business Environment Dr. Arjun
Madan for giving me the opportunity to expel and work in the field of Environmental Analysis,
especially its practical applications. While preparing my project I got to have an in-depth
knowledge of practical applications of the theoretical concepts and definitely the things which I
have learned will undoubtedly help me in future, to analyze many processes going on in our
economy. I would also like to thank all those people who directly or indirectly helped us in
accomplishing this project
Table of Contents
ABSTRACT...................................................................................................................................................... 4
METHODOLOGY ............................................................................................................................................ 5
INDUSTRY AT A GLANCE................................................................................................................................ 9
ABOUT BAJAJ AUTO LTD. ............................................................................................................................ 11
INTRODUCTION ........................................................................................................................................... 12
PESTLE ANALYSIS OF BAJAJ AUTO LTD. ....................................................................................................... 14
CONCLUSION............................................................................................................................................... 18
REFERENCES ................................................................................................................................................ 19
ABSTRACT
There are many companies the world over, that conduct PESTLE analysis on their brands in order
to ascertain strategies for the future or else to understand the market before launching them. It
is a fundamental tool of market planning and strategizing that must be carried out to
comprehend market trends and the systematic risks involved. PESTLE analysis gives you an
overview of the whole situation your business might be in. Precisely, it is a birds eye view of the
stimulus and the scenarios that surround your trade and your business. PESTLE, is an acronym in
which each letter denotes certain factors for the study. These factors affect the market in many
ways and alter the way strategies are thought of and made. P stands for political factors, while E
stands for economic ones. S has to do with social factors in a country whereas T sums up all the
technological aspects of the market. L denotes legalities of the environment and E accounts for
the environmental aspects and its influence upon the nature of the trade you are in. Almost every
major and minor organization tries to conduct this analysis, but with regards PESTLE analysis
example, I have taken Bajaj Auto Ltd. as the company for analysis. In this paper, we will be looking
at all of the above-mentioned aspects and their effect on the Business Environment of Bajaj Auto
Ltd.
METHODOLOGY
The majority of resources explain the application of PESTEL assuming their audience is business
owners. This article adopts an alternative approach and below is the explanation of the
framework
Application of PESTEL can be facilitated via the following steps:
Step 1: Data Collection
Bajaj Auto Ltd. was selected for this analysis and data relevant to it was gathered from various
sources. The data included but was not limited to Companys annual report, companys official
website, some websites that better explain PESTLE analysis, online versions of the popular
business journals in India such as Business Today, Forbes India, Inc. India, Business World etc.

Step 2: Deciding which factors to discuss

There is a vast range of political, economic, social, technological, environmental and legal factors
that affect the company that has been chosen for the analysis and discussion about all of them
in a paper isnt feasible. Hence, the most significant factors for your analysis were chosen.
Unfortunately, there is no general rule or a universal recipe as to what factors to discuss. The
table below illustrates the most significant factors that affect business organizations listed in
order of importance:

Political Economic
1. Macroeconomic climate in the country
1. Government stability 2. Inflation rate
2. Level of bureaucracy 3. Interest rate
3. Extent of corruption 4. Currency exchange rate
4. The freedom of press 5. Tax rates
5. Home market lobbying and import restrictions 6. Rate of unemployment
6. Tax policies 7. Cost of labor
7. Trade control 8. Availability of credit
8. Tariffs 9. Changes in disposable income of consumers
9. Activities of trade unions 10. Governments monetary and fiscal policies

Social Technological
1. Changing family values 1. Industry-specific technological innovations
2. Childless families 2. Increasing popularity of e-commerce
3. Same sex marriages 3. Increasing integration of IT and internet into
business processes
4. Aging population
4. Changes in technological infrastructure
5. Population growth rate
5. Rate of technological change
6. Health-consciousness of population
6. Changes in communication infrastructure
7. Level of education
8. Consumer attitude towards imported products
and services
9. Changes in consumer purchasing habits
10. Impact of religion and beliefs

Environmental
1. Increasing media coverage of environmental Legal
issues 1. Trade regulation/de-regulation
2. Climate change 2. Regulation of competition
3. Global warming 3. Anti-trust rules and regulations
4. Environmental pollution 4. Discrimination law
5. Impact of activities of non-government 5. Copyrights, patents and intellectual property law
environmental organizations
6. Data protection law
6. Ozone de-layering
7. Employee health and safety rules and regulations
7. Consumer attitudes towards green products
Step 3: Writing
Each of the point above mentioned need not be discussed and only the critical ones will be
discussed keeping in mind the length of this paper. From the above table first 5 points will be
taken and enlisted in the form of a table which will be followed by discussion of each individual
factor listed.

Political Economic
1. Macroeconomic climate in the country
1. Government stability 2. Inflation rate
2. Level of bureaucracy 3. Interest rate
3. Extent of corruption 4. Currency exchange rate
4. The freedom of press 5. Tax rates
5. Home market lobbying and import restrictions

Social Technological
1. Changing family values 1. Industry-specific technological innovations
2. Childless families 2. Increasing popularity of e-commerce
3. Same sex marriages 3. Increasing integration of IT and internet into business
processes
4. Aging population
4. Changes in technological infrastructure
5. Population growth rate
5. Rate of technological change

Environmental Legal

1. Increasing media coverage of environmental 1. Trade regulation/de-regulation


issues 2. Regulation of competition
2. Climate change 3. Anti-trust rules and regulations
3. Global warming 4. Discrimination law
4. Environmental pollution 5. Copyrights, patents and intellectual property law
5. Impact of activities of non-government
INDUSTRY AT A GLANCE
Current Status

The Indian two wheeler industry is current bright spot in the automobile industry. After worst
recession in calendar year 2008, the two-wheeler industry bounced back quickly, consistently
recording y-o-y growth from February 2009 onwards.The two-wheeler industry has consistently
improved on sequential basis as well as y-o-y basis after falling down to levels of 5,52,058 two
wheelers sold in December 2008 to 808075 two wheelers in May 2009. In FY09, the total 2-
wheeler sales grew by 5 per cent from 8068991 vehicles in FY08 to 8,44,1844 vehicles in FY09.
The growth in two wheelers were triggered by couple of factors such as 4 per cent excise
duty cut announced in stimulus package in December 2008, fuel price reduction of Rs 5 per litre
in petrol and Rs 2 per litre in diesel as well as the unaffected and untapped demand from the
rural market. In case of 3 wheeler industry, the domestic sales have perked up from low of 19048
vehicles in Dec 2008 to 30036 vehicles in May 2009 post excise duty cut of 4%. However, 3-
wheeler industry continues to struggle with lack of credit as well as Light commercial vehicles
eating into its marketshare especially in goods carrier segment. Nevertheless, Bajaj Auto is
launching 2 three wheelers in FY10 one in goods carrier and other in passenger carrier.

Industry expectations

Retain the existing excise duty on 2 & 3 wheeler at 8%.


Release a measure to boost retail lending in big way in PSU banks
Abolish fringe benefit tax.
Analysts/market expectations
Reduce interest rates on auto loans and credit availability on 2-wheeler and 3 wheeler
loans. The lack of finance and high interest rates limits the growth in both the 2 wheeler
and 3 wheeler industry.
Retain the existing excise duty on 2 & 3 wheeler at 8%. The reduction in the excise duty
to 8% enabled the revival of the 2 & 3 wheeler sales. Thus retention of the same will
provide support for 2 & 3 wheeler industry to continue to grow.
Companies to watch

Bajaj Auto, Hero Honda, TVS, Mahindra & Mahindra


Outlook

Currently, the 2 wheeler industry is thriving thanks to excise duty cut and conscious effort of
players to focus on the untapped unaffected rural demand and premium bike segment. In
contrast, 3 wheeler industry's growth is still muted despite revival from the downtrend. A focus
on credit availability to 2 & 3 wheeler loans and lowering of interest rates could boost their sales
especially the 3 wheeler industry's. If the customs duty on steel, aluminium etc is raised, then it
will be negative for the auto industry in general and 2 & 3 wheelers in particular.
ABOUT BAJAJ AUTO LTD.
Bajaj Auto limited is Indias leading two-wheeler manufacturer. Its expertise lies in making bikes,
sports bikes, racing bikes, scooter and motorcycle. Bajaj Auto is a part of Bajaj group. Its founded
by Jamnalal Bajaj at Rajasthan in the 1930s.Bajaj Auto was founded on 29 November,1945 as M/S
Bachraj trading limited. It started off by selling imported two and three wheelers in India. It
obtained the license from government of India in 1959 to manufacture two and three wheelers
and it went public in 1960.Bajaj Auto is the worlds third largest manufacturer of motorcycles and
second largest in India. Bajaj Auto has in all three plants, two at Waluj and Chakan in Maharashtra
and one plant at Pant nagar in Uttaranchal, western India.
The Bajaj Group is amongst the top 10 business houses in India. Its footprint stretches
over a wide range of industries, spanning automobiles (two wheelers manufacturer and three
wheelers manufacturer), home appliances, lighting, iron and steel, insurance, travel and finance.
The group's flagship company, Bajaj Auto, is ranked as the world's fourth largest three and two-
wheeler manufacturer and the Bajaj brand is well-known across several countries in Latin
America, Africa, Middle East, South and South-East Asia. Founded in 1926, at the height of India's
movement for independence from the British, the group has an illustrious history. The integrity,
dedication, resourcefulness and determination to succeed which are characteristic of the group
today, are often traced back to its birth during those days of relentless devotion to a common
cause. Jamnalal Bajaj, founder of the group, was a close confidant and disciple of Mahatma
Gandhi. In fact, Gandhiji had adopted him as his son.
This close relationship and his deep involvement in the independence movement did not
leave Jamnalal Bajaj with much time to spend on his newly launched business venture. We are
celebrating 125th Birth anniversary of Shri. Jamnalal Bajaj on 4th of November 2014.
His son, Kamalnayan Bajaj, then 27, took over the reins of business in 1942. He too was
close to Gandhiji and it was only after Independence in 1947, that he was able to give his full
attention to the business. Kamalnayan Bajaj not only consolidated the group, but also diversified
into various manufacturing activities. The present Chairman of the group, Rahul Bajaj, took
charge of the business in 1965. Under his leadership, the turnover of the Bajaj Auto the flagship
company has gone up from INR.72 million to INR. 120 billion, its product portfolio has expanded
and the brand has found a global market. He is one of Indias most distinguished business leaders,
bike manufacturer India and internationally respected for his business acumen and
entrepreneurial spirit.
INTRODUCTION
PESTLE analysis in Business Environment

Everyday our market is changing the way it is. Many new things are developed and in a matter of
about some seconds, the whole scenario stands different in front of us. Among them, there are
many things that we can control and then there are other things that fall beyond our control and
those are called systematic factors. Systematic things happen in the environment we live in, the
environment that surrounds us and many times they greatly influence us. Businesses are also
influenced by the environment that theyre in and all the situational factors that determine
circumstances from day to day. It is because of this, that businesses need to keep a check and
constantly analyze the environment within which they run their trade and within which the
market lays.
A detailed analysis of the macro-environment or the environment as a whole is called
PESTLE analysis, which precisely means a birds eye view of the PESTLE analysis business conduct.
The PESTLE analysis ascertains for the managers and the strategy builders as to where their
market currently stands and where it will head off in the future. PESTLE analysis consists of
components that influence the business environment and each letter in the acronym denotes a
set of factors that directly or indirectly affect every industry. The letters denote the following
things:
P for Political factors: These factors take into account the political situation of a country and the
world in relation to the country. For example, what sort of government leadership is affecting
what decisions of a country? All the policies, all the taxes laws and every tariff that a government
levies over a trade falls under this category of factors.
E for Economic factors: Economic factors include all the determinants of an economy and its
condition. The inflation rate, the interest rates, the monetary or fiscal policies, the foreign
exchange rates that affect imports and exports, all these determine the direction in which an
economy might move, therefore businesses analyze this factor based on their environment so as
to build strategies that fall in line with all the changes that are about to occur.
S for Social factors: Every country is different and every country has a unique mindset. These
mindsets cast an impact on the businesses and the sales of their products and services; therefore,
PESTLE analysis includes these factors as well. The cultural implications, the gender and
connected demographics, the social lifestyles, the domestic structures; all of these are studied
by companies to understand the market and the consumer better.
T for Technological factors: Technology greatly influence a business; therefore, PESTLE analysis
is conducted upon these factors too. Technology changes every minute and therefore companies
need to stay connected along the way and integrate as and when needed. Also, these factors are
analyzed to understand how the consumers react to technological trends and how they utilize
them for their benefit.
L for Legal factors: Legislative changes occur from time to time and many of them affect the
business environment. For example, if a regulatory body would set up a regulation for the
industries, then that law would impact all the industries and business that strife in that economy,
therefore businesses also analyze the legal developments happening in their environment.
E for Environmental factors: The location of countries influence on the trades that businesses
do. Adding to that, many climatic changes alter the trade of industries and the way consumers
react towards a certain offering that is launched in the market. The environmental factors include
geographical location, the climate, weather and other such factors that are not just limited to
climatic conditions. These in particular affect the agri-businesses, farming sectors etc.
The PESTLE subject should be a clear definition of the market being addressed, this is the
followings: -
1. A company looking at its market
2. A product looking at its market
3. A brand in relation to its market
4. A local business unit or function in a business
5. A strategic option, such as entering a new market
6. A potential acquisition
7. A potential partnership
8. An investment opportunity
PESTLE ANALYSIS OF BAJAJ AUTO LTD.

Macro environmental forces influences on Bajaj Auto Ltd are summarized with in following six
categories to identify the key drivers for change.
Political
In 2002, the Indian government formulated an auto policy that aimed at promoting integrated,
phased, enduring and self-sustained growth of the Indian automotive industry
Allows automatic approval for foreign equity investment up to 100% in the automotive sector
and does not lay down any minimum investment criteria.
Formulation of an appropriate auto fuel policy to ensure availability of adequate amount of
appropriate fuel to meet emission norms
Confirms the governments intention on harmonizing the regulatory standards with the rest of
the world
Indian government auto policy aimed at promoting an integrated, phased and conductive growth
of the Indian automobile industry.
Allowing automatic approval for foreign equity investment up to 100% with no minimum
investment criteria.
Establish an international hub for manufacturing small, affordable passenger cars as well as
tractor and two wheelers.
Ensure a balanced transition to open trade at minimal risk to the Indian economy and local
industry.
Assist development of vehicle propelled by alternate energy source.
Lying emphasis on R&D activities carried out by companies in India by giving a weighted tax
deduction of up to 150% for in house research and R&D activities.
Plan to have a terminal life policy for CVs along with incentives for replacement for such vehicles.
Promoting multi-model transportation and the implementation of mass rapid transport system.
Economic
The level of inflation Employment level per capita is right.
Economic pressures on the industry are causing automobile companies to reorganize the
traditional sales process.
Weighted tax deduction of up to 150% for in-house research and R & D activities.
Govt. has granted concessions, such as reduced interest rates for export financing.
The Indian economy has grown at 8.5% per annum.
The manufacturing sector has grown at 8-10 % per annum in the last few years. More than 90%
of the CV purchase is on credit.
Finance availability to CV buyers has grown in scope during the last few years.
The increased enforcement of overloading restrictions has also contributed to an increase in the
no. of CVs plying on Indian roads.
Several Indian firms have partnered with global players.
While some have formed joint ventures with equity participation, other also has entered into
technology tie-ups.
Establishment of India as a manufacturing hub, for mini, compact cars, OEMs and for auto
components.
Social
Since changed lifestyle of people, leads to increased purchase of automobiles, so automobile
sector has a large customer base to serve.
The average family size is 4, which makes it favorable to buy a four-wheeler.
Growth in urbanization, 4th largest economy by ppp index.
Upward migration of household income levels.
85% of cars are financed in India.
Car priced below USD 12000 accounts for nearly 80% of the market.
Vehicles priced between USD 7000-12000 form the largest segment in the passenger car market.
Indian customers are highly discerning, educated and well informed. They are price sensitive and
put a lot of emphasis on value for money.
Preference for small and compact cars. They are socially acceptable even amongst the well off.
Preference for fuel efficient cars with low running costs.
Technological
More and more emphasis is being laid on R & D activities carried out by companies in India.
Weighted tax deduction of up to 150% for in-house research and R & D activities.
The Government of India is promoting National Automotive Testing and R&D Infrastructure
project (NATRIP)to support the growth of the auto industry in India
Technological solutions help in integrating the supply chain, hence reduce losses and increase
profitability.
Customized solutions (designer cars, etc. can be provided with the proliferation of technology
Internet makes it easy to collect and analyze customer feedback
With the entry of global companies into the Indian market, advanced technologies, both in
product and production process have developed.
With the development or evolution of alternate fuels, hybrid cars have made entry into the
market.
Few global companies have setup R &D centers in India.
Major global players like Audi, BMW, Hyundai etc. have setup their manufacturing units in India.

Environmental
Physical infrastructure such as roads and bridges affect the use of automobiles. If there is good
availability of roads or the roads are smooth then it will affect the use of automobiles
Physical conditions like environmental situation affect the use of automobiles. If the environment
is pleasant then it will lead to more use of vehicles.
Technological solutions help in integrating the supply chain, hence reduce losses and increase
profitability.
With the entry of global companies into the Indian market, advanced technologies, both in
product and production process have developed.
With the development or evolution of alternate fuels, hybrid cars have made entry into the
market.
Few global companies have setup R &D centers in India.
Major global players like Audi, BMW, Hyundai etc. have setup their manufacturing units in India.
Legal
Legal provision relating to environmental population by automobiles.
Legal provisions relating to safety measures.
Confirms the governments intention on harmonizing the regulatory standards with the rest of
the world
Indian government auto policy aimed at promoting an integrated, phased and conductive growth
of the Indian automobile industry.
Establish an international hub for manufacturing small, affordable passenger cars as well as
tractor and two wheelers.
Ensure a balanced transition to open trade at minimal risk to the Indian economy and local
industry.
CONCLUSION
Bajaj is Indias largest automobile manufacturer. It manufactures and sells motor cycles, three-
wheeler vehicles, and spare parts in India and internationally. The company offers its two-
wheeler products under the Avenger, Pulsar, Discover, Platina, KTM, CT, Boxer, and Ninja brand
names. The company sells its products and services through a network of dealers and
distributors. It believes in providing the customer VALUE FOR MONEY, FOR YEARS through their
products & services. Quality, safety & service has been given as much considerations as
productivity, cost & delivery. The strength of the company is its quality products, excellence in
engineering and design, and its ability to delight the customers. The Pulsar, introduced in
November 2004, is continually dominating the premium segment of the motorcycle market,
helping to maintain the market superiority.
Some of the recommendations that can be made to the company after this analysis are as
follows:

Company should keep focusing on the fast-growing motorcycle segment.


Strengthen its position in ungeared segment.
Concentrate on JVs for techno needs.
Look to expand their base outside further. It already had a strong presence in Africa and
South Asian Countries.
Concentrate on Blue Ocean of Second-hand Bike Market.
Aggressive Launch its new Low-Cost Car.
Focus on Easy Credit Lending - In the present economic crisis, Bajaj can utilize its
subsidiary, Bajaj insurance in coming up with schemes that will help consumers buy two
wheelers on friendly terms.
REFERENCES

http://www.managementparadise.com/knt.nallasamygounder/documents/6427/automobile-
industry---bajaj-auto-analysis/
https://www.ukessays.com/essays/education/bajaj-two-wheeler-industry-education-essay.php
https://www.tuzzit.com/en/canvas/PEST_analysis
https://acknowledgementsample.com/acknowledgement-sample-for-school-project/
https://business.mapsofindia.com/india-business/magazine.html
https://www.bajajauto.com
www.brainia.com/topics/pest-analysis-of-bajaj-auto/0