bal neelam (1)
TRANSCRIPT
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Introduction to the company
I INTRODUCTION OF THE COMPANY
The Indian Two-Wheeler Industry
The history of the Indian two-wheeler industry comprising scooters motorcycles and mopeds had its
beginnings in the late 1940s when Bajaj Auto started selling imported scooters (1948) and Automobile Products
of India (API) along with Royal Enfield started manufacturing scooters (1955) and motor cycles respectively in
India In the evolution stage the Indian two-wheeler industry was highly regulated by the Government of India
(GOI) and was largely structured by Indian industrial policies The License Raj system imposed a strict control
on the industry by regulating the entry of new players imports and foreign investments
aHistory of Bajaj Auto
Founded in 1956 at the height of Indiarsquos movement for independence from the British the group has an
illustrious history Theintegrity dedication resourcefulness and determination to succeedwhich are
characteristics o the group today are often tracked back to its birth during those days of relentless devotion to a
common cause Jamnalal Bajaj founder of the group was close confidant and disciple of Mahatma Gandhi In
fact Gandhiji had adopted him as his son The close relationship and his deep involvement in the independence
movement did not leave Jamnalal Bajaj with much time to spend onhis newly launched business venture
His son Kamalnayan Bajaj then 27 took over the reins of business in 1942 He too was close to Ghandhiji and
it was only after independence in 1947 that he was able to give his full attention to the business Kamalnayan
Bajaj not only consolidated the group built also diversified into various manufacturing activities The present
chairman of the group Rahul Bajaj took charge of the business in 1965 Under his leadership the turnover of
the Bajaj Auto the flagship company has gone up from Rs 72 million to Rs 4616 billion its product portfolio
has expanded from one to and the brand has found a global market He is one of the Indiarsquos most distinguish
business leaders and internationally respected for his business acumen and entrepreneurial spirit
This case is about the brand centric strategy that the fourth largest two ndash and three wheeler manufacturer in the
world Bajaj Auto Ltd adopted in 2009 The scooters produced under the Chetak brand name dominated the
Indian two wheelers market from early 1970s to the early 1990s and helped Bajaj Auto became a leader in the
industry As the Indian Two wheeler Industry was deregulated and faced the competition in the 1990s Bajaj
Auto began to face a threat from foreign players In addition in late 1990s due to the shift in consumer
preferences and demand from scooters to motorcycles Bajaj Autorsquos sales and market shares started declining
and posed a challenge of sustenance for the company
As a result by the early 2000s motorcycle sales surpassed that of scooters and Bajaj Auto lost its market share
to Hero Honda In an attempt to recapture market share Bajaj Auto restructured its business and launched new
motorcycle models However Bajaj Auto lost its dominance in the scooter market Realizing the changing
dynamics of the Indian two-wheeler industry and the deficiencies at Bajaj Auto Rajiv Bajaj began to develop a
new strategy for the company He shifted the focus from scooters to motorcycles and emphasized enhancing the
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quality of products With the twin- brand strategy he focused in only two brands Discover and pulsar pulling
back the Bajaj name as it is associated with various other products And with the change in strategy he was able
to double his lost market share as well as sales
Bajaj Auto which began in 1945 as a trading company importing and selling two-and three-wheelers in India
started vehicle manufacturing in 1959 by obtaining the rights from Italy-based Piaggio Once the agreement
with Piaggio2 expired the company made and sold vehicles under the Bajaj name Since the mid-1960s under
the reins of Rahul Bajaj the thirdgeneration head of the company Bajaj Auto began to grow and create the
image of a reliable scooter brand in India
B bajaj auto is a publicly traded and it is the one of the largest private corporation in India
D business model- Business Model - Bajaj Auto has a strong position in motorcycle category (high-margin segment)
and in passenger three wheelers Also the company exports to 50 countries like Africa Middle East amp Latin
America which enables the company to maintain superior margins amp highest profitability compared to the
industry peers
Compititors
Competitors Identification
Company Production Capacity (millions units)
Hero Honda 54
Bajaj Auto 39
TVS 24
HMSI 16
Suzuki 03
Yamaha 06
Royal Enfield 07
Porterrsquos Five Forces Analysis
Supplier Bargaining Power
Suppliers of auto components are fragmented and are extremely critical for this industry since
most of the component work is outsourced Proper supply chain management is a costly yet a
critical need
Buyers Bargaining Power
Buyers in automobile market have more choice to choose from and the increasing
competition is driving the bargaining power of customersrsquohigher With more models to
7282019 Bal Neelam (1)
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choose from in almost all categories the market forces have empowered the buyers to a large
extent All these have been helped by the fact that the customers are well informed about the
products as well through the help of Internet ie customers have product information
Industry RivalryThe industry rivalry is extremely high with any product being matched in a few months by
competitors This instinct of the industry is primarily driven by the technical capabilities
acquired over years of development under the technical collaboration with international
players
Substitutes
There is no perfect substitute to this industry Also if there is any substitute to a two-wheeler
Bajaj has presence in it Cars which again are a mode of transport do never directly compete
or come in consideration while selecting a two-wheeler However with the recent
introduction of Tata Nano cars that come at a very cheap rate they are slowly trying to be a
substitute and a threat to the two-wheeler industry Cycles do never even compete with the
low entry-level moped for even this choice comes at a comparatively higher economic
potential
Summarizing the industry analysis it can be said that the two-wheeler market is attractive as
it scores well on three out of five categories
Entry Barriers
There are high barriers to entry
The market runs on high economies of scale and on high economies of scope as well
Need for technical expertise is high and thus a new entrant will have a huge uphill
task
Owning a strong distribution network is very important and is very costly whichcertainly takes a lot of time and energy There is also involvement of huge cost
All these make the barrier high enough to be restraining for any new entrants in the
market
J Distribution
Showrooms
o Company owned show rooms
o Franchised show rooms
7282019 Bal Neelam (1)
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DealersAgents
Service Centers
K Key Success Factor
1 Style
2 Technology
3 Pricing strategy
SWOT
Lets analyze the position of Bajaj in the current market set-up evaluating its strengths
weaknesses threats and opportunities available
Strengths
Has a highly experienced management that has a good history and reputation
Extensively focused on R amp D
Capable of better product design and developments
7282019 Bal Neelam (1)
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Widespread distribution network
Products across all categories have a performance that is high and noteworthy
The export to domestic sales ratio is high
Great financial support network (For financing the automobile)
High economies of scale
High economies of scope
Weaknesses
Hasnt employed the excess cash for long
Still has no established brand to match Hero Hondas Splendor in commuter segment
in spite of introducing several bikes for that segment
Not a global player in spite of being the highest exporter from India
Not a globally recognizable brand (unlike the JV partner Kawasaki or other brands
like Honda)
Threats
The competition catches-up on any new innovation in no time
In spite of low quality motorcycles a sense of threat always exists from those
imported motorcycles
Margins getting squeezed from both the directions (Price as well as Cost)
TATA Nano and other mini-compact cars have started to become a serious threat to
the two-wheeler industry in whole They seem to have come into existence to replace
the two-wheelers
Opportunities
Double-digit growth in two-wheeler market
Untapped market above 180 cc in motorcycles
More maturity and movement towards higher-end motorcycles
The growing gearless trendy scooters and scooterette market
Growing world demand for entry-level motorcycles especially in emerging
7282019 Bal Neelam (1)
httpslidepdfcomreaderfullbal-neelam-1 25
quality of products With the twin- brand strategy he focused in only two brands Discover and pulsar pulling
back the Bajaj name as it is associated with various other products And with the change in strategy he was able
to double his lost market share as well as sales
Bajaj Auto which began in 1945 as a trading company importing and selling two-and three-wheelers in India
started vehicle manufacturing in 1959 by obtaining the rights from Italy-based Piaggio Once the agreement
with Piaggio2 expired the company made and sold vehicles under the Bajaj name Since the mid-1960s under
the reins of Rahul Bajaj the thirdgeneration head of the company Bajaj Auto began to grow and create the
image of a reliable scooter brand in India
B bajaj auto is a publicly traded and it is the one of the largest private corporation in India
D business model- Business Model - Bajaj Auto has a strong position in motorcycle category (high-margin segment)
and in passenger three wheelers Also the company exports to 50 countries like Africa Middle East amp Latin
America which enables the company to maintain superior margins amp highest profitability compared to the
industry peers
Compititors
Competitors Identification
Company Production Capacity (millions units)
Hero Honda 54
Bajaj Auto 39
TVS 24
HMSI 16
Suzuki 03
Yamaha 06
Royal Enfield 07
Porterrsquos Five Forces Analysis
Supplier Bargaining Power
Suppliers of auto components are fragmented and are extremely critical for this industry since
most of the component work is outsourced Proper supply chain management is a costly yet a
critical need
Buyers Bargaining Power
Buyers in automobile market have more choice to choose from and the increasing
competition is driving the bargaining power of customersrsquohigher With more models to
7282019 Bal Neelam (1)
httpslidepdfcomreaderfullbal-neelam-1 35
choose from in almost all categories the market forces have empowered the buyers to a large
extent All these have been helped by the fact that the customers are well informed about the
products as well through the help of Internet ie customers have product information
Industry RivalryThe industry rivalry is extremely high with any product being matched in a few months by
competitors This instinct of the industry is primarily driven by the technical capabilities
acquired over years of development under the technical collaboration with international
players
Substitutes
There is no perfect substitute to this industry Also if there is any substitute to a two-wheeler
Bajaj has presence in it Cars which again are a mode of transport do never directly compete
or come in consideration while selecting a two-wheeler However with the recent
introduction of Tata Nano cars that come at a very cheap rate they are slowly trying to be a
substitute and a threat to the two-wheeler industry Cycles do never even compete with the
low entry-level moped for even this choice comes at a comparatively higher economic
potential
Summarizing the industry analysis it can be said that the two-wheeler market is attractive as
it scores well on three out of five categories
Entry Barriers
There are high barriers to entry
The market runs on high economies of scale and on high economies of scope as well
Need for technical expertise is high and thus a new entrant will have a huge uphill
task
Owning a strong distribution network is very important and is very costly whichcertainly takes a lot of time and energy There is also involvement of huge cost
All these make the barrier high enough to be restraining for any new entrants in the
market
J Distribution
Showrooms
o Company owned show rooms
o Franchised show rooms
7282019 Bal Neelam (1)
httpslidepdfcomreaderfullbal-neelam-1 45
DealersAgents
Service Centers
K Key Success Factor
1 Style
2 Technology
3 Pricing strategy
SWOT
Lets analyze the position of Bajaj in the current market set-up evaluating its strengths
weaknesses threats and opportunities available
Strengths
Has a highly experienced management that has a good history and reputation
Extensively focused on R amp D
Capable of better product design and developments
7282019 Bal Neelam (1)
httpslidepdfcomreaderfullbal-neelam-1 55
Widespread distribution network
Products across all categories have a performance that is high and noteworthy
The export to domestic sales ratio is high
Great financial support network (For financing the automobile)
High economies of scale
High economies of scope
Weaknesses
Hasnt employed the excess cash for long
Still has no established brand to match Hero Hondas Splendor in commuter segment
in spite of introducing several bikes for that segment
Not a global player in spite of being the highest exporter from India
Not a globally recognizable brand (unlike the JV partner Kawasaki or other brands
like Honda)
Threats
The competition catches-up on any new innovation in no time
In spite of low quality motorcycles a sense of threat always exists from those
imported motorcycles
Margins getting squeezed from both the directions (Price as well as Cost)
TATA Nano and other mini-compact cars have started to become a serious threat to
the two-wheeler industry in whole They seem to have come into existence to replace
the two-wheelers
Opportunities
Double-digit growth in two-wheeler market
Untapped market above 180 cc in motorcycles
More maturity and movement towards higher-end motorcycles
The growing gearless trendy scooters and scooterette market
Growing world demand for entry-level motorcycles especially in emerging
7282019 Bal Neelam (1)
httpslidepdfcomreaderfullbal-neelam-1 35
choose from in almost all categories the market forces have empowered the buyers to a large
extent All these have been helped by the fact that the customers are well informed about the
products as well through the help of Internet ie customers have product information
Industry RivalryThe industry rivalry is extremely high with any product being matched in a few months by
competitors This instinct of the industry is primarily driven by the technical capabilities
acquired over years of development under the technical collaboration with international
players
Substitutes
There is no perfect substitute to this industry Also if there is any substitute to a two-wheeler
Bajaj has presence in it Cars which again are a mode of transport do never directly compete
or come in consideration while selecting a two-wheeler However with the recent
introduction of Tata Nano cars that come at a very cheap rate they are slowly trying to be a
substitute and a threat to the two-wheeler industry Cycles do never even compete with the
low entry-level moped for even this choice comes at a comparatively higher economic
potential
Summarizing the industry analysis it can be said that the two-wheeler market is attractive as
it scores well on three out of five categories
Entry Barriers
There are high barriers to entry
The market runs on high economies of scale and on high economies of scope as well
Need for technical expertise is high and thus a new entrant will have a huge uphill
task
Owning a strong distribution network is very important and is very costly whichcertainly takes a lot of time and energy There is also involvement of huge cost
All these make the barrier high enough to be restraining for any new entrants in the
market
J Distribution
Showrooms
o Company owned show rooms
o Franchised show rooms
7282019 Bal Neelam (1)
httpslidepdfcomreaderfullbal-neelam-1 45
DealersAgents
Service Centers
K Key Success Factor
1 Style
2 Technology
3 Pricing strategy
SWOT
Lets analyze the position of Bajaj in the current market set-up evaluating its strengths
weaknesses threats and opportunities available
Strengths
Has a highly experienced management that has a good history and reputation
Extensively focused on R amp D
Capable of better product design and developments
7282019 Bal Neelam (1)
httpslidepdfcomreaderfullbal-neelam-1 55
Widespread distribution network
Products across all categories have a performance that is high and noteworthy
The export to domestic sales ratio is high
Great financial support network (For financing the automobile)
High economies of scale
High economies of scope
Weaknesses
Hasnt employed the excess cash for long
Still has no established brand to match Hero Hondas Splendor in commuter segment
in spite of introducing several bikes for that segment
Not a global player in spite of being the highest exporter from India
Not a globally recognizable brand (unlike the JV partner Kawasaki or other brands
like Honda)
Threats
The competition catches-up on any new innovation in no time
In spite of low quality motorcycles a sense of threat always exists from those
imported motorcycles
Margins getting squeezed from both the directions (Price as well as Cost)
TATA Nano and other mini-compact cars have started to become a serious threat to
the two-wheeler industry in whole They seem to have come into existence to replace
the two-wheelers
Opportunities
Double-digit growth in two-wheeler market
Untapped market above 180 cc in motorcycles
More maturity and movement towards higher-end motorcycles
The growing gearless trendy scooters and scooterette market
Growing world demand for entry-level motorcycles especially in emerging
7282019 Bal Neelam (1)
httpslidepdfcomreaderfullbal-neelam-1 45
DealersAgents
Service Centers
K Key Success Factor
1 Style
2 Technology
3 Pricing strategy
SWOT
Lets analyze the position of Bajaj in the current market set-up evaluating its strengths
weaknesses threats and opportunities available
Strengths
Has a highly experienced management that has a good history and reputation
Extensively focused on R amp D
Capable of better product design and developments
7282019 Bal Neelam (1)
httpslidepdfcomreaderfullbal-neelam-1 55
Widespread distribution network
Products across all categories have a performance that is high and noteworthy
The export to domestic sales ratio is high
Great financial support network (For financing the automobile)
High economies of scale
High economies of scope
Weaknesses
Hasnt employed the excess cash for long
Still has no established brand to match Hero Hondas Splendor in commuter segment
in spite of introducing several bikes for that segment
Not a global player in spite of being the highest exporter from India
Not a globally recognizable brand (unlike the JV partner Kawasaki or other brands
like Honda)
Threats
The competition catches-up on any new innovation in no time
In spite of low quality motorcycles a sense of threat always exists from those
imported motorcycles
Margins getting squeezed from both the directions (Price as well as Cost)
TATA Nano and other mini-compact cars have started to become a serious threat to
the two-wheeler industry in whole They seem to have come into existence to replace
the two-wheelers
Opportunities
Double-digit growth in two-wheeler market
Untapped market above 180 cc in motorcycles
More maturity and movement towards higher-end motorcycles
The growing gearless trendy scooters and scooterette market
Growing world demand for entry-level motorcycles especially in emerging
7282019 Bal Neelam (1)
httpslidepdfcomreaderfullbal-neelam-1 55
Widespread distribution network
Products across all categories have a performance that is high and noteworthy
The export to domestic sales ratio is high
Great financial support network (For financing the automobile)
High economies of scale
High economies of scope
Weaknesses
Hasnt employed the excess cash for long
Still has no established brand to match Hero Hondas Splendor in commuter segment
in spite of introducing several bikes for that segment
Not a global player in spite of being the highest exporter from India
Not a globally recognizable brand (unlike the JV partner Kawasaki or other brands
like Honda)
Threats
The competition catches-up on any new innovation in no time
In spite of low quality motorcycles a sense of threat always exists from those
imported motorcycles
Margins getting squeezed from both the directions (Price as well as Cost)
TATA Nano and other mini-compact cars have started to become a serious threat to
the two-wheeler industry in whole They seem to have come into existence to replace
the two-wheelers
Opportunities
Double-digit growth in two-wheeler market
Untapped market above 180 cc in motorcycles
More maturity and movement towards higher-end motorcycles
The growing gearless trendy scooters and scooterette market
Growing world demand for entry-level motorcycles especially in emerging