By: Vishvanath Tiwari Maulik Dobariya Rahul Maheshwari Maulik Patel Pathik Joshi

Company background
Established in 1945 by Kamalnayan Bajaj, son of

Jamanalal Bajaj In 1959 company was granted a license to produce 6000 scooters and three-wheelers per annum Started manufacturing in 1961 by setting up a manufacturing 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

 Piaggio collaboration lasted until 1971, when govt.

regulations prohibited a continuation of the alliance New regulations made it even more difficult for large private companies to obtain license to increase production capacity However, restricted import policies also created a protected market for BAL and other domestic twowheeler manufacturers In 1975, BAL established a manufacturing joint venture with state govt. of Maharashtra In 1985, BAL established a second plant at Waluj

 1980s were a period of explosive growth for BAL;

production volume increased from 172000 to 800000 units a year In 1984, govt. policy permitted companies to become full product range manufacturers and to establish foreign collaboration. BAL established technical collaboration with Kawasaki.

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

In 1993
BAL was the worlds largest manufacture of scooters

and worlds third largest manufacture of two and three-wheeler vehicles; annual revenues placed it among top 10 manufacturing companies in Indian private sector
PRODUCTS:

BAL manufactured 12 different models- 5 scooter

models: Cub, Super, Super FE, Chetak, Stride; 3 motorcycle models: M-80, Kawasaki RTZ and Kawasaki 4S; 1 moped model: Bajaj Sunny

 Manufacturing:
By Feb 1993, BAL was producing over 3000 vehicles a

day over two shifts

Employees Scooter Models
4

Motorcycle

Autoriksha w
Front-engine

Akurdi

5800

M-80

Waluj

4800

KB 100, 4S

Rear-engine

 Even though BAL utilized its capacity only up to 60-

70%, it was the worlds lowest cost manufacturer of two wheelers

Industry Structure:
By 1990s, the Indian economy was undergoing a

structural change and imports were made largely unregulated Due to recession consumer purchasing power had dropped substantially and demand for two-wheelers also declined

Consumer and Market Segments

In India, two-wheelers were used for daily commuting

as opposed to leisure/fun use common in developed countries 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 product sales, it also enabled existing BAL owners to change models 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

 Scooters targeted the family man, aged between 27

and 38 years, and was considered as family vehicle that could be used to transport whole family Word-of-mouth recommendations, brand name, fuelefficiency, low maintenance and high resale value were important to these consumers Motorcycle targeted consumers either lived in the countryside or were young single men; 70% of BALs M-80 were sold to rural consumers.

 Younger single male consumers between 21 to 30 years

of age who looked for power and style, Kawasaki KB 100 targeted these consumers; 2-stroke motorcycles targeted at young males and 4-stroke were regarded as workhorses and FE Mopeds appealed to a broader customer segment because they were the cheapest two-wheelers available. Bajaj Sunny were targeted at teenagers and women who looked for style and trendy features

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

Honda, Suzuki, Yamaha, Piaggio Honda was the most important competitor in 1993. Its scooter product Kinetic Honda held 14% of market and it had technical advantages over BAL scooters such as electric starter and modern automatic drive. Hondas strategy had been to increase its number of dealers and provide them with avg. margins of 4.5% Yamaha held 15% of the motorcycle market with Escort RX 100

 Suzuki had a joint venture with TVS and held 8% of

the motorcycle market. Piaggio had collaboration with LML and held 11% share of scooter market

BALs Marketing Strategy

BAL didnt have marketing dept. since demand

outstripped capacity and BAL enjoyed a protected sellers market As competition increased in mid-1980s and capacity constraints 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

 These are 4Ps company could have considered:

PRODUCT Product variety Quality Design Features Brand name Services Warranty PROMOTION Sales Promotion Advt. Sales force Public Relation Direct marketing Services Warranty PLACE Channels Coverage Locations Inventory

PRICE Least Price Discounts Allowances Payment Period Credit Terms

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

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

Promotion Strategy
Ad expenditure accounted for1% of sales doubled than

earlier Maintained brand awareness Ads were developed in collaboration with dealers TV advertising accounted for 45% of total media expenses and 45% for print advertising and 10% for magazines Positioning of product as an investment Cooperative advertising matching advt. expenses with dealers 1:1 for local press ads

Pricing Strategy
Retail price increased by 7%
Manufacturer margin 15% Dealers 4% Use of fuel injection technology

Why did BAJAJ fail to see future market??

Complacency
Strategic myopia Unable to analyze changing external environment Inertia Changing marketing environment from monopoly to

oligopoly

Porters five-force model:

New Entrants Opening International market Suppliers Existing Rivals Hero Honda,LML

BUYERS Changing Consumer preferences

Substitutes

Suggestions on Marketing Strategy- What BAL couldve done

BAL should go for rural market As it was large growing market and BAL had 60% of market share Go for exports in foreign markets Options available for other consumer durables with

BAL but cost benefit analysis has to be done before entering into such market Repositioning Strategic partnership

 Diversification strategies: Different products for same market An entirely different technology, different product for new market Continuous reviewing policy
Cater to changing customer preferences Improving agility in reading demand pattern

Thank You!!