Bajaj Auto Ltd.

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Presented by:K.R. SudhakarJr. MBA(ABM)

Book Review:

Book Name: Case studies in business Strategy

Volume-6

Publisher: ICFAI center for Management Research

Contents: TATA motors: serving an ‘ace’ for success P&G’s success story in china Embraer : The Brazilian Aircraft manufacturer’s

turnaround and growth Doing business the sustainable way “climate cool” ;

helping business become carbon neutral The Indian pharma industry under the product

patent regime Google’s problems in china British American tobacco in south Korea Business transformation at Telefonica De Espana Shanghai automotive industrial corporation’s

strategies for global expansion

Voltas Ltd. : from turnaround to the ‘Big Bang’ Target stores’ differentiation strategies Aldi: A low cost retail giant’s distinctive business

practices Samsung electronics: success by design Airasia : southeast Asia's most successful low

cost airline Bajaj auto Ltd.: overtaken in the indian scooter

market Grasim Industries Ltd. &-Expanding a

Commodity Market through Branding & CRM

Case study on Bajaj auto Ltd. Introduction:

In the mid -1940s,BAL started as an important of two –and three-wheelers .in the early 1960s,BAL ,in collaboration with piaggo ,started manufacturing vespa brand scooters at its plant near pune , Maharashtra

In 1970s,BAL started manufacturing scooters under the Bajaj brand.

Bal’s first scooter model under the Bajaj brand was introduced in 1972.

In the late 1990’s the Indian two wheeler market witnessed a shift in consumer preferences

In 2005-06 scooter sales in the Indian market were around 1 million units annually and consisted predominantly of gearless scooters. In early 2006 BAL announced that it would launch two new models of gearless scooters in 2006-07.

Background Note: The Bajaj group was founded in 1926 by Jamnalal Bajaj

(Jamnalal) (Refer Exhibit I for the companies in the Bajaj group as of 2005). In 1945, Kamalnayan Bajaj, Jamnalal's son, set up Bachraj Trading Corporation Ltd. (BTCL), a trading company, to import and sell two- and three- wheelers. This business continued till 1959.

In 1959, the company secured a license from the Government of India (GoI) to manufacture two- and three-wheelers. In 1960, BTCL was renamed Bajaj Auto Ltd. (BAL) and the company went public. The same year, it entered into a technical collaboration with Piaggio for the manufacture of scooters...

BAL & the Indian Two-Wheeler Market:

Between the mid-1950s and 1980s, the Indian industry operated under what was popularly termed the "License Raj". During this period, entities that wanted to produce two-wheelers were required to secure licenses from the GoI. The production capacity was also determined by the GoI...

The Turning Point: The early 1990s saw a recession in the Indian

two-wheeler market. Overall sales of two-wheelers declined by 15% in 1991 and 8% in 1992 . This period also saw a steep rise in fuel prices, which resulted in consumers placing greater emphasis on fuel efficiency when purchasing a new two wheeler.

However, even as late as 1997-98, the scooter segment was the largest sub-segment in the two-wheeler market. Scooters, with 42% of the market (in terms of unit sales), were followed by motorcycles (37%), and mopeds (21%)...

BAL Fights Back: By the end of FY 2000, the numbers clearly indicated

that consumer preference had shifted firmly toward motorcycles with four-stroke engines, and industry watchers predicted that this trend would continue. Geared scooter sales registered a fall of 41% in 2001. "The market has shifted to motorcycles. We will have to follow the trend, "said Venu Srinivasan, chairman, TVS

. BAL realized, though rather belatedly, that it would have to cater to the changing consumer tastes and preferences, if it had to survive. Rajiv, who later agreed that BAL had been slow in reading the demand pattern, said, "See, the company failed to anticipate the consumer behavior...

The Fall of an Icon:

In January 2006, BAL announced that it had stopped production of the Chetak. With this announcement, BAL closed a major chapter in its history. Rajiv said, "It is a history I would like to forget. My company has lived too long on nostalgia…holding on to anything from the past is a sign of weakness."...

Outlook: The late 1990s saw the popularity of scooters

wane and motorcycles emerge as the new favorites in the Indian two-wheeler market. It was believed that the dramatic shift happened because players like BAL did not pay sufficient attention to design, R&D, and customer satisfaction.

Bajaj Auto Limited (BAL) is one of the leading players in the Indian two-wheeler market, the second largest two-wheeler market in the world.

Continued…

The case traces the company's rise to dominance in the scooter segment of the market, and its eventual fall, against a backdrop of changes in customer tastes and preferences.

It describes the reasons for the shift in demand and discusses the initiatives that the company undertook to regain lost ground. The case also discusses the competition in the Indian scooter market, and ends with a brief discussion on recent developments in the two-wheeler market.

Images of Bajaj Bikes:

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