1. CHALLENGES FOR BAL AS IN 1993.

Internal Challenges:

A) Lack of design capability and the ability to translate new products

from concept to commercialization.
B) Lack of sufficient skilled R&D resources, which significant hurdle for
enhancing R&D capability.
C) Slow response from own suppliers
D) Approximately 50% of components were sourced from outside
vendors with whom BAL engineers worked hard to achieve
consistently high quality.
E) 4-stroke engine faced number of technical issues.
F) Operating expenditures also major challenge as volume got reduced.
G) BAL selling vehicles via dealer networks, and to provide better in
quality in services, need to provide more numbers of service centers.

External Challenges:

A) Increase in competitions in terms of quality aspects with Honda, Yamaha, and

Suzuki being higher-tech, more modern, and better finished.
B) Lack of technical collaboration with foreign technologies.
C) Cycle time for BAL almost double than Japanese brands.
D) BAL selling vehicles via dealer networks, and to provide better in
quality in services, need to provide more and more service centers.
E) Cannibalized BAL new product sales, it also enabled existing BAL
owners to change models regularly since they could recapture a good
portion of their purchase costs by reselling in the secondary market
F) Reduction in sales volume in scooter segment and increase in
operation expenses results in lesser operation profits.
G) Further tightening of Indian emissions influenced future product
development plans, BAL still not proven with 4 strokes as compared
to Honda, which adapted market within 2 years.
H) Technical advantage over the BAL scooters with features such as
electric starter and a modern automatic drive giving strong
competitions
I) Serious challenges especially with Motorcycles segment due to lack of
proven technology and vast players in competition due to open
market,
 2. BAL's PERFORMANCE AS OF EALRY 1993

1) Witnessed in saturation of the market, excess production capacity, and

increased competition results reduction percentage increase in sales.
2) The 4-stroke motorcycle, the Kawasaki 4S, and the Bajaj Sunny, a
moped launched in 1991, that enabled BAL to enter this segment of the
two-wheeler market; and the Super Fuel Efficient scooter which
increased fuel efficiency.
3) BAL employed 346 staff and 124 workmen in R&D, and R&D
expenditures totaled 1% of sales.
4) Operating expenses increased compared to previous year despite of
less of volume of sales results in reduction in profit.
5) Marginally increased in sales compared to previous year.

3. MARKET EVALUATION FOR TWO AND THREE WHEELERS IN

INDIA

In India before 1980s, India’s industrial development policy was characterized

by excessive regulation. Initially set up to avoid overcapacity in a capital-
scarce economy, in 1980’s it spawned a maze of regulations governing
product, capacity, technology, and foreign exchange availability. The opening
of the Indian economy resulted in the entry of foreign competitors and
expanded production by domestic manufacturers.

1) Restrictive government import policies also created a protected market

for domestic two-wheeler manufacturers in 50’s and 60’s.
2) Till 1970s, both government licensing and price controls remained.
3) Ninety percent of three-wheeler vehicles were used as low-cost
passenger taxis the remaining 10% was used as light commercial
vehicles. During 1980’s due to avlaibility of foreign exchange policy the
major Japanese brands had all been marketed, being higher-tech, more
modern, and better finished than domestic products. However they
were more costly to purchase and maintain, with limited spare parts
availability. Market for two and three wheelers expands in 80’s due to
removal of restrictions on capacities and increase in competitions
 among increase in players. Two-wheelers were used for daily
commuting in cities and suburbs.becames very popular in lower and
middleclass income group
4) Due to increase in fuel pricing, public transport and increase in buying
power moped and motorcycles were also upcoming exclusive
segments in two wheelers.
5) In early 90’s things have change due to recession and excess
production capacity, and increased competition. The products like low
cost moped and Bajaj Sunny were targeted at teenagers and women
who looked for style and trendy features. Included consumers over 55
years who wanted a low-cost means of personal transport.
6) Lot of options were implemented to boost of sales by having customer
finance facility and by having number of more distributed network to
enhance sales and service centers.

4. BAL's response to the competition (option and evaluation)

1) Despite of being ccompetitive, BAL lacked design capability and the

ability to translate new products from concept to commercialization as
fast as its Japanese competitors. Bajaj believed that there was little
chance of further alliances with BAL’s major competitors and that R&D
capabilities would have to be developed in-house, supplemented by
specific research agreements and technology acquisitions involving
outside organizations such as Orbital.

2) BAL selling vehicles through dealers, BAL vehicles was subcontracted

to 75 private transport companies who managed a total fleet of 1,400
trucks, each truck being capable of transporting 45 vehicles. Transport
took between 3 and 21 days to reach a dealer. By enhancing
distribution network to penetrate more and more locations.

3) Forty BAL salespeople, organized geographically, helped the dealers

plan product-specific sales targets, provided them with services and
advertising support, and trained their staffs. BAL service engineers
were deployed at dealerships to upgrade the technical capability of
dealer service.
4) In 1990 an additional parts distributor channel was opened to serve the
extensive independent retail parts network existing in the country. In
1992, 180 people were employed in service activities and 42 in spare
parts.

5) By 1993, BAL had developed a network of 330 authorized dealerships

in India, up from 184 in 1989, and 800 licensed service centers.

6) Consumer financing -o increase sales, BAL established Bajaj Auto

Finance Ltd. (BAFL) in 1988 to provide consumer finance. By 1992,
BAFL had financed over 100,000 vehicles through the BAL dealer
network.

7) Advertising and promotions-In 1992, it was estimated that 20 million

color televisions and 50 million black-and-white televisions were in use
in India. BAL planned to be more aggressive in its advertising,
positioning its products more clearly, describing additional features
and addressing competitor claims head on. New promotions planned
for 1993 included two direct mail marketing campaigns.

8) Pricing – BAL selling a good quality product at a reasonable price. All

BAL scooters were priced lower than comparable competitor products.
Pricing strategy that ensured an average manufacturer’s margin of
15%, gave dealers an adequate return, and created a reputation with
consumers.
 5. SIGNIFICANCE OF EXPORT FOR BAL

1) In 1975, for the first time, BAL exported 1,500 three-wheeler

vehicles to Bangladesh and also license arrangement with the
Indonesian collaborator covered assembly-cum- progressive
manufacture of two scooter models.

2) In 1979, foreign distributorship was established in Sri Lanka and

the export of complete vehicles was initiated.

3) In 1980s, production capacity constraints in India were lifted BAL

turned to developing exports. Distributorships were established on
an opportunistic basis in the United States, Germany, Southeast
 Asia, and North Africa.

4) Developed countries 50cc-moped with peppy; styling market was

largest segment while 3-wheeler market in developed countries was
virtually nonexistent.

5) Developing countries market for Two-wheelers and three-wheelers

segment and their competition within it already intense. Latin
America was an attractive market, particularly for scooter segment.
Developing countries were more prices sensitive, but product
performance regulations were less stringent than in developed
countries. It also having significant volume from such continents.

6) Overall Asian and Latin America were significant market places for
BAL as export

6. CHOICE OF MARKET FOR EXPORT

 Developed Countries: Europe/U.S./Japan:

Moped under 50CC,
Peppy, good styling and performance.
Service and distribution extensive. Dealers have product liability.

Segment: Moped/Sunny -BAL

 Developing Countries: Latin America, Africa/Asia:

Two-wheelers and three-wheelers.
 Low price, fuel efficient, durability of 10-15 years.
Spare parts and service access critical. Model changes a negative.
Initial cost and ability to repair product cheaply critical.
First and only vehicle. Essential for work and transportation.

Segment: 2 Wheelers Motor cycles & Scooter -BAL

3 Wheelers autorikshaw- BAL

 Neighboring countries like Bangladesh and Sri lanka:

Two-wheelers and three-wheelers.
Scooters as the family vehicle.
Fuel efficient and reliable
Up-to-date features for the same price.
Personal transportation.
Segment: 2 Wheelers -Scooter -BAL
3 Wheelers auto rickshaws- BAL