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Case Study of Bajaj Auto LTD
Case Study of Bajaj Auto LTD
Transformation of a Giant
Group Members Roll No.
Syed Golam Gaous 58
Soumodeep Mitra 47
Subha Rudra 51
Tanmoy Dutta 67
Sayak Ghosh 66
ISBE SA-2
History , development and growth of Bajaj Auto Ltd
Bajaj Auto Limited is India's largest manufacturer of scooters and motorcycles. The company
generally has lagged behind its Japanese rivals in technology, but has invested heavily to catch
up. Its strong suit is high-volume production; it is the lowest-cost
scooter maker in the world. Although publicly owned, the company
has been controlled by the Bajaj family since its founding.
Jamnalal Bajaj was succeeded by his eldest son, 27-year-old Kamalnayan, in 1942. Kamalnayan,
however, was preoccupied with India's struggle for independence. After this was achieved, in
1947, Kamalnayan consolidated and diversified the group, branching into cement, ayurvedic
medicines, electrical equipment, and appliances, as well as scooters.
The precursor to Bajaj Auto had been formed on November 29, 1945 as M/s Bachraj Trading
Ltd. It began selling imported two- and three-wheeled vehicles in 1948 and obtained a
manufacturing license from the government 11 years later. The next year, 1960, Bajaj Auto
became a public limited company.
Rahul Bajaj reportedly adored the famous Vespa scooters made by Piaggio of Italy. In 1960, at
the age of 22, he became the Indian licensee for the make; Bajaj Auto began producing its first
two-wheelers the next year.
Rahul Bajaj became the group's chief executive officer in
1968 after first picking up an MBA at Harvard. He lived next
to the factory in Pune, an industrial city three hours' drive
from Bombay. The company had an annual turnover of Rs 72
million at the time. By 1970, the company had produced
100,000 vehicles. The oil crisis soon drove cars off the roads
in favor of two-wheelers, much cheaper to buy and many
times more fuel-efficient. Rahul Bajaj
A number of new models were introduced in the 1970s, including the three-wheeler goods
carrier and Bajaj Chetak early in the decade and the Bajaj Super and three-wheeled, rear engine
Autorickshaw in 1976 and 1977. Bajaj Auto produced 100,000 vehicles in the 1976-77 fiscal
year alone.
The technical collaboration agreement with Piaggio of Italy expired in 1977. Afterward, Piaggio,
maker of the Vespa brand of scooters, filed patent infringement suits to block Bajaj scooter sales
in the United States, United Kingdom, West Germany, and Hong Kong. Bajaj's scooter exports
plummeted from Rs 133.2 million in 1980-81 to Rs 52 million ($5.4 million) in 1981-82,
although total revenues rose five percent to Rs 1.16 billion. Pretax profits were cut in half, to Rs
63 million.
Japanese and Italian scooter companies began entering the Indian market in the early 1980s.
Although some boasted superior technology and flashier brands, Bajaj Auto had built up several
advantages in the previous decades. Its customers liked the durability of the product and the
ready availability of maintenance; the company's distributors permeated the country.
The Bajaj M-50 debuted in 1981. The new fuel-efficient, 50cc motorcycle was immediately
successful, and the company aimed to be able to make 60,000 of them a year by 1985. Capacity
was the most important constraint for the Indian motorcycle industry. Although the country's
total production rose from 262,000 vehicles in 1976 to 600,000 in 1982, companies like rival
Lohia Machines had difficulty meeting demand. Bajaj Auto's advance orders for one of its new
mini-motorcycles amounted to $57 million. Work on a new plant at Waluj, Aurangabad
commenced in January 1984.
The 1986-87 fiscal year saw the introduction of the Bajaj M-80 and the Kawasaki Bajaj KB100
motorcycles. The company was making 500,000 vehicles a year at this point.
The Bajaj Sunny was launched in 1990; the Kawasaki Bajaj 4S Champion followed a year later.
About this time, the Indian government was initiating a program of market liberalization, doing
away with the old 'license raj' system, which limited the amount of investment any one company
could make in a particular industry.
A possible joint venture with Piaggio was discussed in 1993 but aborted. Rahul Bajaj told
the Financial Times that his company was too large to be considered a potential collaborator by
Japanese firms. It was hoping to increase its exports, which then amounted to just five percent of
sales. The company began by shipping a few thousand vehicles a year to neighboring Sri Lanka
and Bangladesh, but soon was reaching markets in Europe, Latin America, Africa, and West
Asia. Its domestic market share, barely less than 50 percent, was slowly slipping.
By 1994, Bajaj also was contemplating high-volume, low-cost car manufacture. Several of
Bajaj's rivals were looking at this market as well, which was being rapidly liberalized by the
Indian government.
Bajaj Auto produced one million vehicles in the 1994-95 fiscal year. The company was the
world's fourth largest manufacturer of two-wheelers, behind Japan's Honda, Suzuki, and
Kawasaki. New models included the Bajaj Classic and the Bajaj Super Excel. Bajaj also signed
development agreements with two Japanese engineering firms, Kubota and Tokyo R & D. Bajaj's
most popular models cost about Rs 20,000. 'You just can't beat a Bajaj,' stated the company's
marketing slogan.
The main competitors of Bajaj two wheeler in the market are Hero Honda and TVS. In case of
motorcycle the market is divided in different segments. Here segmentation is generally done in
the basis of price, engine power, features etc. Typically in Indian market there are segments
comprising of 100cc, 100-125cc, 150-180cc, 180cc and above.
Bajaj Platina: - Bajaj Platina is a new 100cc bike from Bajaj Auto
Ltd. with a mileage of 70 km on road conditions. The bike is
equipped with exclusive streak design side panels and with sleeker
rear panels. It is a budget bike in two variants, complimenting the
existing CT 100 model from the company in the lower segment of
the bike market. Some of the important features are
2. World first SNS (spring N spring) rear suspension with the longest travel in its class of
100mm
1. DTS-I twin plug technology with exhaust TEC and direct fuel
injection
Hero Honda Passion Plus:- It is a 100cc bike from Hero Honda wit all
new impressive design with host of safety features. It has a 12.8 lt engine
and priced around Rs 42,000.
Hero Honda Splendor Plus:- It is a specialized bike for office goers having impressive design
and styling. Priced at around Rs 40,650 and having high mileage and low maintenance cost are
the special weapon of this bike .
TVS Centra:- Launched with the latest VTI( Variable timing intelligent) engine technology with
7.5 bhp, 11 lts engine and priced around Rs 33,000- 37,000.
Discover DTSi
Bajaj Wind :- Powered with the state of the art 125cc K-TEC engine
technology, wind produces the strong output of 10.8 bhp with torque
9.8Nm @ 7000rpm. With efficient braking system Bajaj Wind priced at Rs
50000 advertised as a WORLD BIKE.
Bajaj Wind
Bajaj XCD-125:- With all new “Digital Twin Spark- Swirl induction”
engine for better fuel efficiency bajaj XCD priced at Rs 41000 with a 8
litres engine and 9.53 ps @ 7000 rpm, it is totally targeted to the
middle class segment of the country.
Honda CBF Stunner, Suzuki Zeus, Suzuki heat, TVS Flame, Yahama Gladitor, TVS Victor
New GLX 125 are some of the competitor of Bajaj in this segment.
Bajaj Avenger:180 cc- With the punch line “feel like God” Avenger
with a dynamic cruiser look, linear and smooth power delivery is truly
a great bike to have. It comes with the DTSi engine an incorporates the
ExausTEC for better low end torque. Priced around Rs 60000 gives a
total cruising experience.
Bajaj Avenger
Some of the competitors of Bajaj Motorcycles are:-
Competitors of Bajaj Auto Ltd in this segment are
Kinetic Comet
Royal Enfield Thunderbird
Apart from this Bajaj has also few scooter Variants in its armory such as
SWOT Analysis:
Now we will analyze the positioning of Bajaj Auto Ltd (BAL) in the current market set up,
evaluating its strengths, weaknesses, threats and opportunities available.
STRENGTHS:
4) Technological capability with the introduction of the revolutionary Digital Twin Spark
Ignition (DTSi) technology.
10) Great financial support for financing the automobile, the uniqueness of the scheme is added
benefit of “free extended warranty” on every Bajaj Motorcycle finance by Bajaj Auto Finance.
11) Presence in every segments of two wheelers and three wheelers as well.
14) Has high market share in scooter segment which helps it to get into the foray in motorcycle
segment.
3) Still not able to give competition to Hero Honda’s Splendor and Hero Honda Passion in
commuter segment.
4) Stands to lose in entry level segment and not got expected feedback in gain in its 125cc
and above bike segments.
5) Not a global player in spite of its huge volumes and cash flow.
EXTERNAL FACTORS:
OPPORTUNITIES:
5) Kawasaki’s plan to use Bajaj’s plants to manufacture two wheelers for its
global operation can help it to boost Bajaj’s name in global market.
THREATS:
1) The market share in the scooter segment has taken a beating from TVS Suzuki’s entry into
this segment.
2) Entry of MNCs, especially Chinese ones, in the motorcycle segment will stiffen the
competition and will hamper the efforts of Bajaj to establish itself in the motorcycle segment.
3) Increase of steel and aluminium cost squeezes the margins of Price and Cost.
Internal Factors
• XCD 125cc
• Discover 135cc
• Pulsar 200 & 220 cc
Cows Dogs
• CT100 • Kristal
• Three wheeler e.g. Mega
Max
Five forces analysis of bajaj
Michael porter provided a framework that models an industry as being influenced by five forces.
This strategic business manger seeking to develop an edge over rival firms can use this five
forces model to better understanding the industry context in which the firm operates.
ENTRY BARRIER
1. The market runs on high
economies of scale and high
economies of scope.
2. Need for high technical expertise
with the changing scenario.
3. Strong and economic distribution
channel required
4. Strong R & D needed.
INDUSTRY RIVALRY
SUPPLIER BARGAINING POWER BUYER’S BARGAINING POWER
1. Effective supply chain High industry rivalry is 1. Buyers can make choice
management is a critical aspect. from any brand they like. With
very high. Within a
2. Bajaj follows outsourcing of more and more models being
launch of new product launched by competitors, so
its components parts, so
suppliers are very important competitors comes up buyers bargaining power is
part of the industry. with same variant or very essential to the industry.
advance variant of the
product
SUBSTITUTES
1. Although there is no substitute to
this industry. But as the competition
increases new variants may come up
from the rival. Also recently
launched TATA NANO may act as
substitute to this industry.
Strategies of Bajaj Auto Limited: In the long 64 years of its business life in India, Bajaj Auto
Limited has gone through many challenges. At the very beginning, the company had to create a
demand for its two and three wheeler vehicles in the large Indian automobile market. Nearly 40
years after, when Bajaj Auto has become a leading company in the two and three wheeler market
in India, the government has liberalized the two wheeler industry. The global MNCs like Honda
Motors, Yamaha, Suzuki and Piaggio started nosing in the Indian market by merging with
different Indian business groups. Now, Bajaj Auto faced another difficulty – to survive in the
race with its new market competitors as they had better technologies to cash with. The strategy
of Bajaj Auto Ltd. depended on chain of events from the time of incorporation in 1945 to now in
2009. Those strategies are discussed under two perspectives:
Bajaj Auto doesn’t clearly state any mission statement. They define it in terms of brand identity,
brand essence and brand values. The brand of Bajaj Auto values learning, innovation, perfection,
speed and transparency. Their goal is greater organizational profitability, higher employee
morale and greater customer satisfaction.
For the first twenty years of its history Bajaj Auto did not feel to introduce any new products and
simply kept changing with the old Vespa design because of its great demands. Those were the
good old days of Bajaj when they monopolized the market by manufacturing and marketing
Piaggio’s Vespa brand scooters and three wheelers in India. The technical collaboration with
Italy’s Piaggio & Co. expired in 1971.Using the Bajaj brand name the company continued to
produce and sell vehicles. In 1971, the company released three-wheeler goods carrier. In the year
1972, Rahul Bajaj became the chairman of Bajaj Auto Ltd. He was Rahul Bajaj, who gave Bajaj
Auto a new height, a new way to proceed. After completing an MBA degree from Harvard
University, Rahul Bajaj took over the responsibility of Bajaj Auto in 1968. From then, Rahul had
dreamt of making his company the world’s leading manufacturer of two wheelers. Rahul wanted
to see Bajaj Auto Ltd. as world class in India.
After coming out from the joint collaboration of Piaggio & Co., Bajaj Auto Ltd. started to
expand under the leadership of Rahul Bajaj. New models like Bajaj Chetak, Bajaj Super, Rear
engine Auto rickshaws, Bajaj M-50 came out between 1972 and 1981. In the mid 1980s the
government liberalized the two-wheeler industry and the Japanese MNCs like Honda Motors,
Yamaha and Suzuki collaborated with various Indian business groups and started business in
India. Following the tradition, Bajaj Auto collaborated with another Japanese auto giant
Kawasaki and released models like Kawasaki- Bajaj KB100 in 1986 and other models one by
one.
The new market competitors started to grab the market share of Bajaj Auto because of their new
and high quality technology. Bajaj Auto Ltd. – the then Indian auto giant changed its advertising
tagline from “You just can’t beat a Bajaj” to a more gentler and touchy one “Hamara (our)
Bajaj”. After the pollution act was passed by the government, Bajaj Auto released another few
new models before Rajiv Bajaj was gradually in the process of taking over the leadership
responsibilities from his father Rahul Bajaj in 1998.
When Rahul Bajaj took over the responsibility of spearheading the company’s products in 1996,
he found that he had inherited a lumbering giant- a legend, whose legacy needed a major
overhaul. According to him, the major challenges the company was facing were (1) Share in
customer’s mind, (2) Product differentiation, (3) Customer satisfaction, (4) Customer
retention and (5) Cost control. To complete the transition of a new Bajaj Auto, Rahul
emphasized to improve on the above fields. His management team consisted of experienced
stalwarts as well as new faces who had been chosen for its specialist skills. Rajiv Bajaj’s
priorities thus included accessing new technologies, introducing new models, making a strong
presence in the rapidly growing motorcycle market, creating a marketing culture, revamping
manufacturing practices, focusing on quality, improving the supply chain and helping the new
managers integrate into a conservative corporate culture. Marketing strategy of Bajaj Auto is
always one of its greatest strength in its portfolio and their logo and ad line always tunes nicely
with their intentions and provoke people to be attracted to Bajaj Auto. In 1980’s ad line was
‘You Just Can’t Beat a Bajaj’; in the mid-1990’s it was ‘Hamara Bajaj’; towards late 1990s Bajaj
motorcycles claimed to be ‘Unshakeable’
The new visual identity of Bajaj Auto emanates from the confirmation of core values, which
Bajaj has identified as its brand values. The Brand essence for the new Bajaj has been defined as
"Excitement". Excitement engineering will deliver and inspire confidence in to various
stakeholders like Bajaj has traditionally done. Bajaj promises to live its essence through a set of
five Brand Values of Learning, Innovation, Perfection, Speed and Transparency.
The traditional hexagonal symbol has been replaced by an open abstract form of stylized B, the
"flying B" as it has been named represents style and technology. It also has a strong association
with the heritage of Bajaj since the external form has a hint of hexagon. "Flying B" form denotes
speed and open form denotes the transparency. Bajaj has adopted a new brandline of "Inspiring
Confidence". In whatever the company does it seeks to inspire confidence in its audience. The
new identity has a fresh new blue color. This blue represents the stability and strength of Bajaj.
Blue also represents high technology and precision engineering. The new identity presents a
futuristic face of the new global Bajaj.
These are the corporate strategies which Rahul Bajaj considered for transformation of a giant
named Bajaj Auto Limited.
Business Level Strategy of Bajaj Auto:
In the long 64 years of its business life in India Bajaj Auto has changed its business level
strategy from time to time as it evolved through the difficulties of the demand of the market. In
the very early stage the company was in a joint technical collaboration with Italy’s Piaggio &
Company. Bajaj Auto then used to manufacture and market Piaggio’s Vespa Brand Scooters. For
the first 20 years of its history Bajaj Auto didn’t feel to introduce any new product due to the
great demand of Vespa Scooters. As the agreement with Piaggio expired in 1971, Bajaj Auto
launched three wheeler goods carrier in1971. In 1972 a new model named ‘Chetak ’was
launched. Thereafter came a timeline of new releases like Bajaj super, Bajaj M-50. After the
two-wheeler industry was liberalized Bajaj Auto collaborated with Japan’s Kawasaki Motors.
Models like Kawasaki-Bajaj KB 100, Bajaj Sunny were released.
Bajaj Auto Ltd. has always targeted the middle class Indian to expand their market. When the
global MNCs like Honda Motors, Yamaha and Suzuki started their business in India by merging
with various Indian business groups Bajaj Auto felt an immediate threat. They changed their
business tagline from ‘You just can’t beat a Bajaj’ to ‘Hamara Bajaj’. In 1998, the environment
became more complicated. Hero-Honda was gearing up to contest Bajaj Auto’s dominance in the
scooter market. There was a million dollar question to the managers of Bajaj Auto: What
products should it make to dominate India’s two and three wheeler companies.
In 1996, the major challenges the company was facing were (1) Share in customer’s mind, (2)
Product differentiation, (3) Customer satisfaction, (4) Customer retention and (5) Cost control.
To complete the transition of a new Bajaj Auto, the management team gave priorities in
accessing new technologies, introducing new models, making a strong presence in the rapidly
growing motorcycle market, creating a marketing culture, revamping manufacturing practices,
focusing on quality, improving the supply chain and to integrate into a conservative corporate
culture.
Recommendation
Focus on high Margin products: Around 50% of the two wheeler consumer buy high quality
products (products of executive and premium segment motorcycle) Margin on this products are
higher.
Bajaj Auto Ltd adopt a deliberate strategy of focusing on lower end motorcycle and scooters
segments.