International Marketing Report

Bajaj Auto

Ishan Jha
M2 - International Business
EM Normandie
Contents
1. Introduction

2. The Status Quo

2.1. Domestic Strategy

2.2 International Strategy

2.3 Stage of Internationalisation

3. Options for New Market Entry

4. Assessment of the Company : Competitive Strength and Market

Attractiveness

5. Evaluation of the Options

6. Recommendations for Market Entry

7. Implementation of the Strategy

8. Areas for Improvement

9. Executive Summary

1
Introduction
Bajaj Auto, is a manufacturer of two and three-wheelers based in Pune, India. A
subsidiary of the Bajaj Group, one of India’s biggest business houses, it was
founded in 1945 by Jamnalal Bajaj. Apart from being the biggest seller of
three-wheelers with sales of 360,000+ units in 2020-21, it is also the 3rd largest
producer of motorcycles in the world with sales of 3.6M+ units. With an annual
turnover of $3.5B+ and market cap of $13.5B+, it is the world’s most valuable
two-wheeler company. A truly global brand with operations in over 75 countries,
more than 2M of these units have been sold in international markets. Begun as an
importer of scooters, it acquired the license in 1959 to produce the ‘Vespa’ in
collaboration with Piaggeo. It began producing motorcycles in 1986 and expanded
its portfolio to sell three wheelers too. It currently produces motorcycles from 3
locations in India - Chakan, Waluj and Pantnagar with an output of 6.3M vehicles
per year. Bajaj Auto’s business model exhibits cost leadership by producing
budget friendly motorcycles for developing markets while also providing superior
pre-sales services such as Auto Financing, in partnership with its sister firm Bajaj
Finance, as well as after-sales services through its vast dealer network. It has
demonstrated ambition by including high-end performance motorcycles in its
portfolio due to its continued investment in R&D and synergistic acquisitions and
alliances with international players.

Some quick facts about the company:

Headquarters Pune, India

Year of Inception 1945

2
Chairman Rahul Bajaj

Market Capitalisation $ 13.5B

Sales (2020) 4M units

Revenue (2020) $ 4B

Net Profit (2020) $ 680M

Number of Employees 10,000

The Status Quo

National Strategy

Bajaj can trace its roots as an importer of two wheelers in India just as India turned
independent. In 1960, it chose to become a manufacturer of the Vespa scooter in
a license agreement with Piaggeo. It wasn’t 1986 that it became a manufacturer of
motorcycles either. It enjoyed a monopoly in two wheeler production in India until
1990 when the Indian economy was opened to foreign investment.

Its marketing strategy is interesting to study too. Most of Bajaj’s early domestic
advertisements evoked values of patriotism and national pride in customers. It
projected itself as the face of rising India which aspired to own their two wheeler.
With clever advertising, Bajaj's position was cemented in the minds of every Indian
household and kept competition at bay initially. This however changed as the two
wheeler market grew and Bajaj’s products were viewed as inferior and outdated
to consumers. This disruption in the market was a result of bigger and richer
players such as Yamaha and Honda beginning operations in India.

3
Bajaj until 2001 was viewed primarily as a scooter manufacturer until this changed
with the introduction of the Pulsar. The Bajaj Group roped in famous automobile
designer Glynn Kerr and received R&D support from Tokyo to build the prototype.
The bike was a complete success which propelled the company to a 47% Market
Share in the segment, giving Bajaj Auto a market share of 27% in 2011. By April’12
the company had sold more than 5 million units. Pulsar was important in signalling
the transition of Bajaj’s products from smaller sub 125 cc motorbikes to a world of
performance bikes with higher power and better features. It gave the users a
superlative experience and strategically positioned the company as value-based.

Oglivy & Mather have been entrusted with the marketing campaigns of the
company. Several advertisements exhibited the charisma and machismo
associated with riding the bike, clearly keeping the male youth as their primary
target segment. India being a patriarchal society was influenced by popular media
depiction of the alpha male, a regular component of Indian movies.

This led to the launch of their ‘Definitely Male’ tagline capturing this need of the
Indian youth to look more masculine and aggressive.

They continued to position themselves as sporty and daring with the launch of
their new campaign ‘The Fastest Indian’ in 2009.

4
Playing on the feelings of nationalism while projecting it to be the fastest vehicle
seemed to be the perfect marketing concoction to draw in their target segment.
Bajaj Auto recognising the growing use of technology among the youth, built its
first digital media campaign through the ‘Fastest Indian’ campaign, which
encompassed all digital channels apart from traditional media advertisements.

In recent years, Bajaj with its acquisition of the KTM Brand, has began producing
sports bikes again targeted towards the burgeoning youth population of the
country. The KTM brand is presently one of the fastest growing brands thanks to
the superior design and product quality of its vehicles. Bajaj gained access to the
technological processes of KTM which they have since adopted in its range of
products while helping grow the KTM brand through its distribution and
manufacturing capabilities which has led to sales in every year for the last 9 years
shattering the all time record. This pivot in their strategy has helped it expand its
brand identity from being a value for money manufacturer to becoming an
‘All-in-One’ brand serving the needs of any consumer.

5
International Strategy

The 2000s heralded the era when Bajaj focussed its efforts in going global. The
success of the Pulsar gave Bajaj Auto the confidence in its products to build an
export business in similar markets. They made a major thrust in African, Asian, and
South American markets, adapting to the markets and wants of the consumer.
Bajaj capitalised on Indonesia, one of the largest economies and its oldest
markets, due to its dominance in the three-when maeler segment. Here, Bajaj
positioned itself as a luxury brand through aggressively advertising and building
exclusive show-rooms. Meanwhile, they positioned the brand as an affordable
alternative in African markets which was previously captured by low-margin
Chinese manufacturers. The Boxer, its budget brand, was priced slightly higher but
was a more powerful and fuel-efficient vehicle, which ultimately helped save the
consumers more money. Adapting its strategy per the local nuances helped the
company rise to being the leader in 12 countries, from Philippines to Columbia. A
testament to its popularity was when the Pulsar brand sold thrice as much in
Columbia as in India in 2007. Buoyed by this success, the latest ad campaigns
feature the slogan ‘The World’s Favourite Indian’. Trade restrictions and fluctuating
exchange prices remain to be the biggest challenges which Bajaj faces in its quest
towards internationalisation. enjoying leadership positions in 12 countries.

The company is presently the largest exporter for motorcycles and three-wheelers
from India with exports exceeding 2 million units. The company employs a dealer
driven model where the dealer owns the responsibility to import, distribute and
service the vehicle. All manufacturing is done in-house with the dealer being the
primary point of contact for Bajaj in that market. This model has helped the
company trim its costs, hedge its risks and leverage the market expertise of the
local dealer.

6
Bajaj also understood the need to provide quick and flexible financing options to
the consumer to purchase its vehicles. Hence, it launched Bajaj Auto Finance in
international markets, which provided loans and financing schemes for both its
two wheelers and commercial three wheelers. This turned out to be a big success
with more than 3 Million customers served to date.

Stage of Internationalisation

Bajaj Auto commands an international reach through its 66 global distributors

spread across 75 countries. With a global 2-wheeler market share of 26% and
3-wheeler market share of 76%, Bajaj Auto is poised to enter new markets apart
from consolidating their leadership position in existing markets. Bajaj Auto lays
claim to the top two manufacturers in several countries in Africa, where it sells
more than a million motorcycles a year. Latin America is also a crucial market for
the company with 2020-21 bringing in the highest-ever sales reported in the
countries of Mexico, Guatemala, Nicaragua, Honduras, Peru and Bolivia.

Bajaj Auto can be said to be in Stage 4 of internationalization due to its dominance

in the international two and three wheeler market through wholly owned
subsidiaries. It isn’t a trans-national company yet since all of its manufacturing is
done in India. While this is soon to be changed with the setting up of the new
Brazil assembly plant , most of its international operations are driven by dealers
who have been entrusted with the responsibility of selling the brand in their
market.

The firm is now looking to execute the next part of their international strategy - the
ASEAN markets - where the company will sell the KTM branded products which
have better brand identity and product quality.

7
 Global Presence of Bajaj (Source)

Bajaj has become a major international player in the motorcycle market due to its
focus on capturing market share by reducing its margins. However, it is imperative
for the company to continue this expansion in different segments such as sport
and cruiser bikes. Since its acquisition of Austrian sport bike manufacturer KTM
and Swedish manufacturer Husqvarna in the last decade, it has broadened its
horizons and focussed its efforts on catering to the high-end market segment. It
has also entered into an alliance with cruiser bike manufacturer Triumph
Motorcycles from the UK and Japanese company Kawasaki for technology sharing
and distribution. In conjunction with Bajaj’s stellar experience in developing
markets due to its cost leadership strategy, these acquisitions and alliances
indicate Bajaj’s growing appetite to leverage a differentiation strategy by entering
the luxury market.

8
 Global Market Share of Bajaj (Source)

Options for New Market Entry

Bajaj’s traditional business strategy has been to exploit economies of scale to
competitively price its products to give value for money to the aspirational
consumer. Its after-sales service is famous for being no-frills and efficient which
keeps the cost of ownership low.

Bajaj however is looking to transcend its image beyond that of a budget

manufacturer. It is increasingly investing in R&D and through its acquisitions and
alliances with international corporations, it has been making steady progress in
the middle and high segments too. This presents a unique opportunity to explore
two different strategies - one of cost leadership which has been Bajaj’s tried and
tested strategy - and the other of differentiation due to the increasing quality and
range of products.

It would therefore make sense to finalise two different markets - one each from
developing and developed markets - for international expansion. The two
countries studied for market entry are Spain and Algeria.

9
Evaluation of the Options
We looked at two viable options for Bajaj to continue expanding into international
frontiers. To make an informed and data-backed decision, two templates on
‘Competitive Strength of the company’ and ‘Market Attractiveness’ were used with
the results attached here.

In the first template, we gauge the competitiveness of Bajaj in the two and
three-wheeler industry using the criteria of Research & Development, Production,
Marketing and Sales & Service. Bajaj has a trusted brand image carefully built for
75 years and has a good reputation in India. It would also fare well in Algeria
against local competition due to its size and economies of scale. However, Spain
presents a different challenge for Honda is the biggest player in the market with
sports bikes and would make it difficult for Bajaj to make inroads.

In the second template, the lucrativeness of the two markets is measured based
on a weighted average of the economic condition, political stability and
sociocultural factors. Bajaj understandably scores well in its home market due to
its deep understanding of the market behaviour and socio-political climate. It does
well in Algeria primarily due to a product-market fit, cultural fit and low costs since
Algeria is a developing country. Its experience working in volatile environments
would also come in handy. Spain meanwhile scores low in this segment only
because the products which Bajaj sells would not find many buyers due to the
segment in which it primarily operates.

Beyond the obvious considerations of cost and product quality, the perception
and use of motorcycles as a product in society should also be appreciated. In
developing countries, motorcycles are utilitarian due to its cheaper prices when

10
compared to cars and greater fuel economy. 58% of the world’s motorcycles are in
the Asia Pacific and Southern and Eastern Asia regions. Motorcycles are
meanwhile viewed as a luxury good in developed nations and associated with a
lifestyle or subculture. They are used mostly for recreation, as a lifestyle accessory
or a symbol of personal identity.

Below is a Strengths, Weaknesses, Opportunities, Threats (SWOT) analysis.

1. Spain

Strengths: Spain is Europe’s 4th largest motorcycle market with sales of

175K in 2020. It has high purchasing power and strong infrastructure. Apart
from this, it is also characterized by low violence, corruption and
bureaucratic hurdles while setting up business.

Weaknesses: The biggest weakness for Spain would be the declining

economic condition as well as the aging of the demographic. This has led to
sales plateauing. Setting up operations in Spain would be expensive, and it
remains a question if there is a strong enough demand for Bajaj vehicles.

Opportunities: With Bajaj setting up the Engineering Development Centre

(EDC) in Barcelona, I believe Bajaj should find it feasible to begin operations
in Spain. The Engineering Development Centre in Spain would give it the
opportunity to attract the best of European engineering talent. Bajaj would
also benefit from the license sharing agreements with its partners and get
an opportunity to work closely with its European partners. Bajaj only
distributes its bikes in Portugal in all of Western Europe. Due to Spain’s
geographical proximity to Portugal it should be easier for Bajaj to enter
Spain. A local network of dealers and distributors would also be established
due to the presence of the EDC and business operations in Portugal.

Threats: The declining economic condition, mounting levels of public debt

and high unemployment remain as threats for Bajaj to set up a base in

11
 Spain. There is also looming political instability due to the independence
movement in Catalonia which could cause business disruptions.

2. Algeria

Strengths: Potential for development and a low median age would be the
biggest advantage to Algeria’s name. It is a high product market fit with
Bajaj motorcycles too.

Weaknesses: A politically unstable economy, it also has high levels of public

debt and unemployment. The economic decline caused by the pandemic
has resulted in natural gas and oil prices dropping, and the country’s
hydrocarbon revenues falling 33% down to $22 billion last year.

Opportunities: Algeria is among the biggest markets for motorcycles in

Africa and presents a unique opportunity for Bajaj to scale up their
operations. Their experience in Africa, its largest market outside India,
would come in handy.

Threats: Bajaj might find it difficult to enter the automotive market due to
rising protectionism in Algeria. Algeria also has a liquidity crisis wrought by
the pandemic. Political dissatisfaction also remains high which could lead to
a coup as seen previously.

Recommendations for Market Entry

Based on the data which has been collated, it is advisable to go ahead with
Algeria over Spain. Algeria ranks higher based on both international
competitiveness and market attractiveness scores. The reasons behind this can
be explained by Algeria’s latent and growing motorcycle demand in contrast to a
reduction in bike registrations in Spain. Bajaj barely has any presence in Western

12
Europe, and would find this market difficult to penetrate. The picture of local
competition is vastly different as well. Bajaj will be fighting with smaller players in
Algeria which it should find easier to penetrate when compared to Honda, the
biggest seller of motorcycles in Spain and worldwide.

Implementation of the Strategy

Bajaj has catapulted to global prominence through its strategy of cost leadership.
Despite the motorcycles of Bajaj being cheaper, the quality of its products remains
highly rated. This has been achieved through economies of scale - Bajaj has only
3 manufacturing plants, all in India, which are among the largest in the world. This
has reduced one time costs and bureaucratic hurdles in setting up manufacturing
plants around the world.

However, as the company continues to grow and expand, it is looking to localise

more operations. An example of this is Bajaj’s announcement of its
newly-launched Brazil operations. Beyond the typical functions of distribution,
servicing and financing support, it will also be building a manufacturing plant for
assembly operations .

Bajaj has typically followed the export-based externalisation approach while

starting operations in a new country. They have also gradually scaled up in the
number of countries they operate in hence it would be logical to continue with an
incremental step-by-step expansion strategy. Below is the typical life-cycle of the
company’s entry into a market.

13
Therefore, in Algeria it should continue with the dealer-based network. Accessing
global markets would be easier since the local connect of the brand would be
enhanced while the distributor would also handle the supply chain and execution.
Bajaj Auto should provide commercial, marketing and technical inputs to the
distributor so that there is a standardization in processes, user experience and
quality. The supplies and manufacturing should be from India, unless local
assembly is warranted only if cost or legislation necessitates it. 85% of sales
comes from distributors who have been with Bajaj Auto for over 10 years,
therefore it is important to choose a distributor after careful selection. This
approach would help Bajaj hedge its risks in a politically unstable climate while
also providing the local market with internationally recognised motorcycles.

Marketing MIx

The marketing mix consisting of the four Ps of marketing - product, price, place,
and promotion- are the key factors that are involved in the marketing of a good or
service.

14
1. Product: Bajaj’s has a vast product range. It would be infeasible to sell all its
models from the start. Hence, a product survey should be conducted to
decide the products available for sale. According to many customer
surveys, the Bajaj Dominar, Bajaj Pulsar and Bajaj CT 110 are among the
most popular models. The 3 belong to different market segments - cruiser
bike, sports bike and budget bike - and hence would be able to serve a
larger market.
2. Price : This is the cost consumers pay for a product. There could be two
ways of pricing the product - competitor based pricing - where the product
will be benchmarked against that of the competitor and cost based pricing,
where a price is calculated based on the cost and margin to Bajaj. In my
opinion, benchmarking it against the competitor is required since a high
price would drive many buyers away while a low price could lead to poor
brand image of the product. Hence, competitor based pricing while at least
guaranteeing a 8% margin above all costs, would be my preferred strategy.
3. Place : As previously mentioned, Bajaj works on an externalised dealer
driven model. Therefore, the impetus to select the right place for sale would
rest with the dealer. Motorcycles should be sold in exclusive Bajaj
showrooms to cement the brand image on the minds of the consumers. The
user experience should be superlative and hence the staff should be
well-trained. Financing, test-drive, maintenance and customisation options
should be provided during purchase.
4. Promotion : Bajaj Auto realized the need to reach out to target audiences
through the correct use of promotional activities and advertising campaigns.
Bajaj Auto employs a multi-pronged promotion strategy consisting of print,
TV, social media, billboard advertisements. With an internet penetration rate
of 62%, it would be imperative to advertise through social media channels
such as Instagram Ads, Google Ads and Facebook Ads while also not
forgetting the sizable chunk of 38% without access to the internet.
Traditional advertising should be done through billboards, print and TV
media in accordance with Arab values and culture.

15
Areas for Improvement
Despite the robust strategy, there exists plenty of room for improvement. I have
listed them below in the form of points.

1. While export-based externalisation strategy has worked for Bajaj until now,
Bajaj should explore tying up with local suppliers for assembly or
manufacturing to cut down on costs of distribution.
2. The Algerian market due to its geographical proximity to Europe might have
more euro-centric preferences of luxury motorbikes over smaller, utilitarian
ones which Bajaj mainly produces.
3. Finding trusted distributors would be difficult for Bajaj to find in a new
market. Diligent research should be performed to find the right distributor
so as to protect the reputation of the firm.
4. Economic instability and rising protectionism might lead to issues for Bajaj
from entering the Algerian market.
5. There would be a lack of control which Bajaj exercises, versus what it would
if it ran a wholly owned subsidiary instead.

Executive Summary

16
This report explored the rationale behind picking the next country for market entry
as part of Bajaj Auto’s internationalisation plan. To arrive at the decision, the
business model, domestic and international strategy of Bajaj Auto was first
introduced. Then, we compared the two potential countries for entry - Spain and
Algeria. We based the decisions on Quantitative evaluation of the international
competitiveness of the Bajaj Auto brand and the market attractiveness of the two
countries. Algeria was chosen due to its similarity to the Indian motorcycle market.
It was determined to be more attractive than Spain as well as a market where
Bajaj would be highly considered. To enter the market, it was decided to do it in a
stepwise waterfall approach. The market entry would be through export-based
externalisation. First, the dealer partnership would be established where the
dealer could place the motorcycles with the existing ones. As the demand picks
up, exclusive showrooms should be set up with post-service and pre-service
options.

Finally, the marketing mix for Bajaj products in Algeria was described as well as
the limitations of the given approach. The findings of the research place
confidence in Algeria as a suitable market for expansion.

17