Bajaj Auto limited

GROUP 9 Chandan Jaishree Namit Pallavi Rimi Rohit Kiran

Case Background
Situation
BAL is well established player in Indian automobile market Products include scooters, motor cycles, mopeds, three wheeler It caters to both Indian and international markets Export sales less than 2% of total sales Half of which comes from Asia only 40% of total sales accounted by rural market

Questions

What growth strategy should BAL follow? How to protect domestic market share? How to increase exports to 15% of total sales by 1998?

Complication
Stagnant domestic market Increasing competition

Market Environmental Analysis

Political and legal

Deregulation of economy resulting in increased competition from foreign players Cap on imported components ( 45% to 5% over a period of 5 years)

Economical

Economic recession leading to stagnant market condition Higher interest rates hampering expansion plans

Socio-cultural

Increase in volume of consumer goods Inadequate public transportation Migration to suburbs Changing role of women

Technological

Advancing automobile technology leading to more product variants Use of software enhancing R&D and production capabilities

Competitor Analysis
Parameters Fuel efficiency Service center Dealer satisfaction # of Dealers Market Share (Scooter, Motorcycle) Price Re-Sale Value Dealer Margin (Avg.) Maintenance * Licensed service centers Bajaj High High High 330 + 800* High, Low Low 60% 3.3% Low Honda (Hero , Kinetic) Low Low N.A 608 Low , High High 40% 4.5% High

SWOT
Strengths
Well placed product with a high value proposition Dealer network Huge and Loyal Strong distribution Network Economies of scale Broad product portfolio Collaboration with Japanese player

Weakness
Long cycle time from inception to commercialization Lack of R&D expertise Slow response of suppliers

Financing option

Opportunities
Export opportunities for mopeds, bikes and scooters 3 Wheeler market development in developed countries Meta-Market development Consumer Financing and Spare Parts

Threats
Increasing competition Threat of new entrants Economic recession Increased range of consumer goods

Market segmentation

Rural Income Age Males 21-27

Lower Income (Up to 12.5 k pa)

Urban Males Power and Style Power and Style Females Style and trendy features Style and trendy features -

Power, Cost Power, Cost Sturdy and powerful Sturdy and powerful -

27 38 >38 21-27

Family Vehicle
Power and style Power and Style Family Vehicle

Middle Income (12.5 k 40 k pa)

27 38
>38

Value Proposition
Emotional Value
Hamara Bajaj

Economic Value Fuel efficient Low maintenance High resale value Reasonable price

Functional Value Sturdy Vehicle Availability of spare parts Riding comfort High reliability

Growth Options
Products & Services
Existing New

Markets

Rural Market Consumer Finance

Introduce New Product variants to cater to developed markets

Existing

Export 2 wheelers and 3 wheelers in Europe/Americas

Auto Component Manufacturing 4 Wheeler

New

Growth Alternative 1 Export Market

Market Attractiveness

Strengths

Challenges

Success probability

Latin America

Strong & Growing Demand No Competition in 3 wheelers Less stringent regulation

Price advantage over Japanese 2 wheeler Suitable existent product

No foreseeable challenges

Attractiveness

Success probability

Europe

Price advantage in moped segment Experienced in creating a niche market

Attractiveness

Big under 50 cc moped market No Import Duties Import duties for Japanese

Stringent Regulation Less product features compared to competitors Threat from Japanese once import duty is waived

Growth Alternative 1 Export Market (Contd..)

Market Attractiveness

Strengths

Challenges

Success probability
Opportunity in above 250 cc segment No visible strength

Africa/China /S.E Asia

Attractiveness Attractiveness Success probability

Stringent Regulation Non existent market for 3 wheelers Strong competition from Japanese

USA

Less stringent regulation Potential for 3 wheeler market Essential for work and transportation

Product requirement similar to existing products

Tariff barriers and import bans Intense competition in China Low purchasing power in Africa

Export ( 2 Wheeler) Market Size Estimation

Market

Production Deficit* (in units)

BAL Export (in units)

Market Opportunity* (in units)

West Germany Malaysia Thailand

115000 74000 88000

666 0 610

114334 74000 87390

* Production Deficit = Production Sales Market Opportunity = Production Deficit BAL Export

Data source: Exhibit 9 and Exhibit 10

Growth Alternative 2 India/Sri Lanka/Bangladesh

Market Attractiveness Strengths Challenges

Rural Market

Success probability
Huge untapped potential Value proposition rightly suited for rural customers Good brand image Scattered Market Competition from Hero Honda

Attractiveness Attractiveness Attractiveness Success probability Success probability

Consumer Financing

No competition in the market

Well established dealer base which can be leveraged Have some experience in this business

High Default rate could eat into profits

Motorcycle Market

Changing needs leading to increasing motorcycle demand

Tie up with Kawasaki Agreement with orbital

Competition from Honda, Yamaha

Indian 2 Wheeler Market Size Estimation

India total Population = 844 million Avg. members per household = 8 ( Assumption ) Number of Household = 10,55,00,000
% of % Of Income Brackets scooters household owned < 12500 12500-25000 25000-40000 40000-56000 >56000 % of motorcycles owned % of Mopeds owned Means of Transportation Motorcycle Total in Use (1992)

58% 27% 10% 3% 2%

8% 26% 36% 17% 13%

8% 27% 34% 18% 13%

10% 41% 35% 8% 6%

Scooters
Mopeds

3900000 7500000 4600000

Income Brackets Income Brackets < 12500 12500-25000 25000-40000 40000-56000 >56000 Number of Households Scooters Owned Motorcycles Owned Mopeds Owned < 12500

Households Without 2 wheeler

Maximum potential

6,11,90,000 6,00,000 2,84,85,000 19,50,000 1,05,50,000 27,00,000 31,65,000 12,75,000 21,10,000 9,75,000

3,12,000 10,53,000 13,26,000 7,02,000 5,07,000

4,60,000 18,86,000 16,10,000 3,68,000 2,76,000

5,98,18,000 29,90,900 2,35,96,000 23,59,600 49,14,000 7,37,100 8,20,000 3,52,000 1,23,000 17,600

12500-25000 25000-40000 40000-56000 >56000

Total

8,95,00,000 62,28,200

Data Source: Table B,C

Export opportunities in LA and Europe Market

Market penetration in Rural Domestic Market

Motorcycle Product development

Consumer financing

Final Recommendation

Thank You