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

• 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. Restrictive Import Policies. Licenses required for production Capacity Restriction because of Capital Scarcity • Regulations governing Technology. .

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

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

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

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

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

INTEGRATED MARKETING All departments work together to serve the customer’s interests. No company can operate in all markets. PROFITABILITY Profits through customer CONCEPT . 2. TARGET MARKET: First the company must identify and define the target market.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. 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. 4.

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. . THE SOCIETAL MARKETING CONCEPT IMPLICATIONS: …social and ethical considerations into marketing profits.

EXAMPLE • Marketing of Tobacco Products. • 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 .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.

Comparing the Selling Concept and Marketing Concept For Bajaj Auto Ltd. 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 .

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 .

• 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. 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).

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

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 .

Foreign • Emphasis on Styling.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. 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 .

DISTRIBUTION STRATEGY • 330 Exclusive Dealers • 75 Private Transport Companies • Computerization of Distribution System.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 . Linking of Dealers to BAL Family. • Spare Parts supply through Service/Dealer Network. • Extensive Distribution of Spare Parts.

2%) • Competitive Ad Spend: Competitors also spent 1% of Sales.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. •Need to Maintain Brand Awareness and Brand Preference •TV Advertising 45% of Total Media Expenditure • Slice of Life Advertising. 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 .

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

5% 2 wheelers Bajaj Kawasaki 3 wheelers Kinetic: Scooters Mopeds Hero Motorcycles. Mopeds FOREIGN COLLABORATIONS: Bajaj-Kawasaki Kinetic-Honda Hero-Honda LML-Piaggio Escorts-Suzuki .COMPETITORS (1992) Bajaj Auto: 46.5% (All 2 Wheelers) Others: 53. Mopeds LML Only scooters Escort Only Motorcycles TVS Motorcycles.

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

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.

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.. Market development Strategy EXPOR T MARKE 4. Market penetration Strategy BAJAJ entry into RURAL MARKET SEGMENT 3. Diversification BAJAJ ELECTRICAL APPLIANCES Cooking Ovens . Product development BAL Three Wheelers PASSENGER CARS New markets 2. BAL Started With Two Wheelers LINE EXPANSION DESIGN IMPROVEMENTS Existing markets URBA N MARK ET 1.How could BAL achieve Intensive Growth ….

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

Establish Strategic Business units (SBUs) • Assign resources to SBUs WHAT IS AN SBU? • Plan new business. -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. .

150cc Scooters ALL THESE will all normally comprise one SBU. SBU 4: Bajaj Auto Finance SBU 5: Bajaj Electronics .HOW TO CLASSIFY BAJAJ AUTO’S SBU’S SBU 1: Two Wheelers: 50cc Mopeds. 100 cc Motor Cycles. 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 .

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. .It has its own set of Competitors -Own Strategic plan and Profit Performance 1 √ √ SBU SBU 2 3 ? .

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. Strategy for Achieving Long-term objectives. .

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% .3 •GENERAL ELECTRIC MODEL (Market AttractivenessBusiness Strength) GE Model) . 10%/ 30%=0.0.14.

2x .1x MARKET SHARE RELATIVE TO LARGEST Relative Market Share .5x .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 1.4x .3x .5x 1x 5 Cash cows ?2 INVEST DIVEST ? ? 1 Dogs 8 6 4x HARVEST 7 .

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