Business strategy of Bajaj Auto Limited

Abstract: The case discusses the business strategy of Bajaj Auto Limited (Bajaj Auto), a leading Indian manufacturer of two wheelers. Bajaj Auto, which sold two wheelers in India since 1945, was the market leader in the Indian two wheeler industry till late 1990s. However, the company failed to visualize the structural changes happening in the Indian two wheeler industry since the early 1990s. After the Indian economy was liberalized in 1991, foreign players entered the Indian two wheeler industry with their innovative products and sophisticated technology. In spite of rising competition, Bajaj Auto neither upgraded its scooter models, nor focused on the rapidly growing motorcycle segment. In late 2001, Bajaj Auto initiated a transformation process in an effort to transform its image from being a scooter manufacturer to a motorcycle company. At the same time, the company continued its efforts to revive the geared scooter market. The company continued to invest time and resources in the geared scooter segment even till the early 2000s when the sales of geared scooters were negligible as compared to the gearless scooters. Bajaj Auto also failed to introduce innovative products in the rapidly growing gearless scooter market. The company lost its leadership status in the scooters segment to Honda Motorcycles and Scooter India (HMSI). The case examines how Bajaj Auto became a follower both in the scooter and motorcycle segment from being the market leader in the Indian two wheeler industry. Introduction On July 18, 2009, India-based Bajaj Auto Limited (Bajaj Auto), a leading manufacturer of two wheelers and three wheelers, launched the 100 cc Discover DTS-Si motorcycle. The new product had several unique features such as a Digital Twin Spark-Swirl Induction (DTS-Si) engine, nitrox suspension, the longest wheelbase in the 100 cc segment, a 5 speed gear - the first in the 100 cc segment, and a maintenance free battery. Commenting on the new product, Rajiv Bajaj (Rajiv), Managing Director, Bajaj Auto, said, "We are launching a bike which is not seen as a 100 cc bike and we wish to offer it to people who typically buy 100cc motorcycles but would like to upgrade. For Bajaj Auto, the launch of the 100 cc Discover DTS-Si motorcycle served as a point of re-entry into the entry segment of the motorcycle market. The company had reduced its focus on the entry segment motorcycles three years earlier, citing low operating margins, even though the entry segment motorcycles accounted for about 50 percent of the company's total sales volumes in 2006.

Commenting on the launch of the new product and the renewed focus on the 100 cc motorcycle segment, Rajiv said, "We are not changing our strategy. The 100 cc market has got numbers. All we wanted to do was give the commuter a choice, more value for money. We have no choice but to have substantial share here. Bajaj Auto, which had been selling two wheelers in India since 1945, was the market leader in the Indian two wheeler industry till the 1990s, riding on the success of its popular scooter models. The company faced hardly any significant competition during that time, but this worked against the company. It grew complacent, with the result that it failed to realize the structural shift in demand toward motorcycles among Indian consumers... The Indian Two Wheeler Industry The history of the Indian two wheeler industry can be traced back to the mid-1900s. In 1952, Enfield India Limited (Enfield) started manufacturing motorcycles. In 1955, Automotive Products of India (API) began manufacturing scooters in the country. In the 1950s, two other companies, Ideal Jawa (India) Limited (Ideal Jawa) and Escorts India Limited (Escorts) also entered the motorcycle segment. Enfield, which initially imported the Bullet, a 350 cc motorcycle from the United Kingdom (UK), started producing it in India in 1956. Ideal Jawa and Escorts sold motorcycles under the brand names, Yezdi and Rajdoot. In 1971-72, the motorcycle segment held a 36 percent share of the total two wheeler sales...
About Bajaj Auto

The history of Bajaj Auto dates back to the early 1900s. In 1930, the Bajaj Group was formed by Jamnalal Bajaj (Jamnalal). In 1945, Kamalnayan Bajaj, Jamnalal's elder son, established Bachraj Trading Corporation Limited (BTCL) to import and sell two and three wheelers in India. Till 1959, BTCL was importing two and three wheelers from Italy and selling them in India. In 1959, the company got a license to manufacture scooters in India...
The Transformation

In late 2001, Bajaj Auto started a new advertising campaign to change its image of being only a scooter manufacturer. In the advertisements, Bajaj Auto showed motorcycles instead of scooters as part of a conscious effort to change the company's image. The advertisements showed 'slice of life' situations of 'new age India'.

What Went Wrong? According to industry experts, Bajaj Auto, in spite of being the oldest manufacturer of two wheelers in India, was not proactive enough to visualize the structural demographic changes happening in India. Till the late 1990s, it was the market leader in the two wheeler industry. However, it did not upgrade its scooter models, nor did it introduce new motorcycle models. Despite the opening up of the Indian economy, and foreign players coming in with their innovative technology, it continued to rely on its old scooter models. However, with the competition growing, it was forced to focus on the motorcycle segment... Future Outlook

In the first quarter of the financial year 2009-10, the motorcycle unit sales of Bajaj Auto declined by 14 percent compared to the corresponding quarter of the previous year. However, the revenue sales figure grew by 29 percent compared to the fourth quarter of 2008-09. The company attributed this success to the launch of the XCD 135 DTS-Si, the new Pulsar 150 DTS-Si, and the Pulsar 180 DTS-Si since February 2009
Issues:

Examine the growth strategy of Bajaj Auto over the decades. Study the transformation process initiated by Bajaj Auto and its impact. Analyze the shortcomings in the business strategy of Bajaj Auto.