Bajaj Case Study

7/31/2019 Bajaj Case Study

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By:

Vishvanath TiwariMaulik Dobariya

Rahul Maheshwari

Maulik PatelPathik oshi


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Company background Established in 1945 by Kamalnayan Bajaj, son of

Jamanalal Bajaj

In 1959 company was granted a license to produce6000 scooters and three-wheelers per annum

Started manufacturing in 1961 by setting up amanufacturing unit at Akurdi and entered into a

technical collaboration with Piaggio By 1966, BAL had become the largest Indian producer

of two wheelers and product demand exceeded supply


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Piaggio collaboration lasted until 1971, when govt.regulations prohibited a continuation of the alliance

New regulations made it even more difficult for largeprivate companies to obtain license to increaseproduction capacity

However, restricted import policies also created a

protected market for BAL and other domestic two-wheeler manufacturers

In 1975, BAL established a manufacturing joint venturewith state govt. of Maharashtra

In 1985, BAL established a second plant at Waluj


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1980s were a period of explosive growth for BAL;production volume increased from 172000 to 800000units a year

In 1984, govt. policy permitted companies to becomefull product range manufacturers and to establishforeign collaboration. BAL established technical

collaboration with Kawasaki.


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Prior to 1993 BALs business strategy had four objectives:

Keeping cost and prices low

Improving product quality Focusing on two and three-wheeler vehicles

Striving for economies of scale


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In 1993 BAL was the worlds largest manufacture of scooters

and worlds third largest manufacture of two andthree-wheeler vehicles; annual revenues placed itamong top 10 manufacturing companies in Indianprivate sector

PRODUCTS: BAL manufactured 12 different models- 5 scooter

models: Cub, Super, Super FE, Chetak, Stride; 3motorcycle models: M-80, Kawasaki RTZ and

Kawasaki 4S; 1 moped model: Bajaj Sunny


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Manufacturing:

By Feb 1993, BAL was producing over 3000 vehicles a

day over two shiftsEmployees Scooter

ModelsMotorcycle Autoriksha

w

Akurdi 5800 4 M-80 Front-engine

Waluj 4800 3 KB 100, 4S Rear-engine


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Even though BAL utilized its capacity only up to 60-70%, it was the worlds lowest cost manufacturer oftwo wheelers

Industry Structure:

By 1990s, the Indian economy was undergoing a

structural change and imports were made largelyunregulated

Due to recession consumer purchasing power haddropped substantially and demand for two-wheelers

also declined


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Consumer and Market

Segments In India, two-wheelers were used for daily commuting

as opposed to leisure/fun use common in developedcountries

The early 1990s witnessed a saturation of the market,excess production capacity and increased competition

Resale market for two-wheelers was increasingly

strong. Although this cannibalized BAL new productsales, it also enabled existing BAL owners to changemodels regularly since they got a good resale value

In 1992, 40% of BALs domestic sales were made to

rural market- concerned primarily with value for


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Scooterstargeted the family man, aged between 27and 38 years, and was considered as family vehicle thatcould be used to transport whole family

Word-of-mouth recommendations, brand name, fuel-efficiency, low maintenance and high resale valuewere important to these consumers

Motorcycle targeted consumers either lived in thecountryside or were young single men; 70% of BALsM-80 were sold to rural consumers.


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Younger single male consumers between 21 to 30 yearsof age who looked for power and style, Kawasaki KB100 targeted these consumers; 2-stroke motorcyclestargeted at young males and 4-stroke were regarded asworkhorses and FE

Mopeds appealed to a broader customer segmentbecause they were the cheapest two-wheelersavailable. Bajaj Sunny were targeted at teenagers andwomen who looked for style and trendy features


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Competitors Major competitors: Kinetic, Hero, LML, Escorts,

Honda, Suzuki, Yamaha, Piaggio

Honda was the most important competitor in 1993. Itsscooter product Kinetic Honda held 14% of market andit had technical advantages over BAL scooters such aselectric starter and modern automatic drive. Hondasstrategy had been to increase its number of dealersand provide them with avg. margins of 4.5%

Yamaha held 15% of the motorcycle market with EscortRX 100


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Suzuki had a joint venture with TVS and held 8% ofthe motorcycle market. Piaggio had collaboration withLML and held 11% share of scooter market


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BALs Marketing Strategy BAL didnt have marketing dept. since demand

outstripped capacity and BAL enjoyed a protectedsellers market

As competition increased in mid-1980s and capacityconstraints were lifted, a marketing dept. evolved

Marketing Objective:

Increase sales to 1 million units Maintain 50% market share

Market leadership in all 2 wheeler subcategories


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These are 4Ps company could have considered:

PRODUCTProduct

varietyQualityDesignFeaturesBrandnameServicesWarranty

PLACE

ChannelsCoverageLocationsInventory

PROMOTIONSalesPromotionAdvt.Sales forcePublicRelation

DirectmarketingServicesWarranty

PRICE

Least PriceDiscountsAllowances

PaymentPeriodCreditTerms


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To what extent these concepts

were implemented?? Product Strategy:

Product line expansion: full line of 2 and 3 wheelers to

protect market share They placed greater emphasis on:

Product improvement

Quality improvement

Styling features Improved electrical system

Fuel efficiency


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Distribution Strategy 330 exclusive dealers

Computerization of distribution system

Spare parts supply through Service/Dealer network 800 service centers

No credit policy for dealers

Setting up of regional depots to improve availability


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Promotion StrategyAd expenditure accounted for1% of sales doubled than

earlier

Maintained brand awarenessAds were developed in collaboration with dealers

TV advertising accounted for 45% of total mediaexpenses and 45% for print advertising and 10% for

magazines Positioning of product as an investment

Cooperative advertising matching advt. expenses withdealers 1:1 for local press ads


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Pricing Strategy Retail price increased by 7%

Manufacturer margin 15%

Dealers 4% Use of fuel injection technology


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Why did BAJAJ fail to see future

market?? Complacency

Strategic myopia

Unable to analyze changing external environment Inertia

Changing marketing environment from monopoly tooligopoly


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Porters five-force model:New

EntrantsOpening

Internationalmarket

SubstitutesBUYERSChanging

Consumerpreferences

Suppliers

ExistingRivalsHero

Honda,LML


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Suggestions on Marketing

Strategy- What BAL couldvedone BAL should go for rural market

As it was large growing market and BAL had 60% ofmarket share

Go for exports in foreign markets

Options available for other consumer durables with

BAL but cost benefit analysis has to be done beforeentering into such market

Repositioning

Strategic partnership


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Diversification strategies:

Different products for same market

An entirely different technology, different product fornew market

Continuous reviewing policy

Cater to changing customer preferences

Improving agility in reading demand pattern


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Thank You!!

Documents

Bajaj Case Study