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Bajaj auto limited report

Contents:
Introduction1
The background of Bajaj Auto.1
Pest analysis..1
Porters Five Forces Analysis..3
Internal environment analysis..4

SWOT analysis..4
Generic strategy.6
Growth strategy..6
Market entry.6
Segment and positioning7

Recommendations..7
Conclusion9
References ..10

Introduction:
The purpose of this report is for analyzing and discussing within the scope of
business environment of Bajaj Group, with benefitting suggestions in marketing
aspect for its development of becoming an international global brand.
This report includes three main parts which are shown as below:

1 Looking at external environmental analysis and evaluate a particularly suited


development within the scope of Bajaj relating to marketing internationally within the
manufacturing sector.
2 Put forward a feasible marketing strategy in order to help bajaj to expand their
international market and solve out some possible problems during this process.
3Critically analyze the relationship between consumers, customers and enterprise
stakeholders, as well as discuss the importance of relationship marketing under the
background of Bajaj Group planning to target as an international brand.

The background of Bajaj Auto


In the middle of 1920s, the company Bajaj Auto was founded with an illustrious
history at the period of India's movement for independence from the British.
Nowadays in India, this Bajaj Group nearly reaches one of the best ten business
houses. In the meantime, Bajaj Auto, a flagship company of the group, is ranked as
the fourth largest two- and three- wheeler manufacturer in the world. And the brand
Bajaj is well-named as well as respected in many areas all over the world such as
South East Asia, Africa, Latin America, and the Middle East. Tracing back to the birth
of this company during those hard times, which allowed its main characteristics
including integrity, dedication, resourcefulness and determination that to succeed
(Bajaj Auto website, 2011).
Referring to the data from Marketline (2013), as an India-based manufacturer and
marketer of two and three wheeled vehicles, Bajaj Auto Limited produces
motorcycles, scooters goods carriers and passenger carriers. In India, this company
primarily operates in Pune where it is headquartered and they had a large
employment of 8,627 people as on March 31, 2012. The data comparison in 2011
and 2012, the company's profitability was improving, which recorded revenues of
2390.9 million pounds during the financial year ended March 2012 (FY2012), an
increase of 18.9% over FY2011. There was 367.7 million pounds during FY2012, an
increase of 15.1% over FY2011 in the operating profit of the company. Besides, there
was only a decrease of 11.9% as compared to FY2011 when the net profit was 384.3
million pounds in FY2012. (Marketline, 2013).
Pest analysis:
Political:
Investment policy- 100 per cent foreign direct investments (FDI) are allowed in
companies through the automatic approval route
International companies can invest in India either by picking up a 100 % equity stake
or by acquiring a share jointly with another company in the auto and auto ancillary
segments.
Policy aims to promote a globally competitive auto industry in India.
Emission control laws
India has one of the most stringent emission norms in the world.
Safety laws
Tighter emission standards have edged out two stroke motorcycles, which emit high
levels of hydrocarbons and particulates vis--vis four-stroke bikes.

Economics:
Interest Rates
Large firms have a cost advantage due to lower rates of interest they are charged
while applying for loans (lower risk involved).A lot of capital is needed to enter the
industry as initial outlays on investment are high, thus higher interest rates would
prove as a disincentive to enter the industry.
Inflation
The buyer is highly price sensitive, and changes in prices affect the industry as a
whole as buyers may not be in a position to buy a more expensive product. If inflation
affects the two-wheeler and four wheeler industry differently, then inflation could well
have an adverse impact on this sector
Economic Prospects
A lot of capital is needed to enter the industry, which may be difficult to come by if the
economy is not doing well and relatively easier to obtain if the economy is doing well.
In times of economic boom, there are a large number of buyers. Switching costs
involved in switching to substitutes. It is easy to switch between suppliers.
Social:
Age of the Population: As the demographics of India are skewed towards the youth,
more and more people are likely to tread unknown paths.
Population has a strong opinion on green issues more educated people are focused
towards greener issues, which Bajaj has been able to address significantly.
Technological:
Increasing costs due to business cycles, rising steel and oil prices
Proficiency in Understanding Technical Drawings, specifications and well conversant
in all Global Automotive Standards
Porters Five Forces Analysis:
Existing competition among enterprises is very high. In the two-wheeler industry,
mainly have three big enterprises which have the fiercest competition in between
them. They are Bajaj Auto, Hero Honda and T V S Motor Co. In addition, there are a
few small companies also gaining the market share namely LML and Kinetic. Due to
this fierce competition, the sellers in this industry constantly do discount, product
launches, and they also have to give out freebies to attract more attention.
There has a high threat from substitute product in this industry. This Industry is
directly faced with the competition in automotive industry. With the increase in bank
finance and the raise in disposable earnings people prefer to have cars more willingly
than two-wheelers. As a result, the demand of people on cars in this market is a
direct impact on the demand of two-wheelers. On the contrary, if the demand for cars
decreases, the demand of two-wheelers will rise.

The barriers for entering and exiting are high. The three big enterprises (Bajaj Auto,
Hero Honda and T V S Motor Co.) are leading the main market, so the demands of
investment compete with them would be enormous. As a result, new entrants to the
industry are very complicated. Low industry attractiveness is not because of the profit
issue, but because of the strong and insurmountable competitors.
Supplier bargaining power is poor. The two-wheeler industry relies on only a few
selected suppliers. Therefore, the bargaining power is very weak.
The buyer's bargaining power is high. There have various of products for customers
to choose, every customer is treated as a sovereign.
Through observation, according to previous Bajaj the running of the company used to
have no marketing department, but only a dispatch department, so customers had
been ignored all those time. The rules of the game have changed differently now.
Clients should be focused in any related activities. Any activities regarding production
and selling should be on public and try to get attention from consumers and
impressed them.
Internal environment analysis
With the strong financial support from Bajaj group (Marketline, 2013), Bajaj auto have
done lots of improvements. It claims on technology reform, and there has been a
breakthrough innovation which allows them to have a better future in development. In the
Bajajatuo website (2011a), it can be seen that there are a lot of advantages of using the
engine oil "Bajaj DTS-i 10,000". For example, better viscosity stability for better
Lubrication and fuel efficiency, better clutch performance, better wear resistance and
so on. More importantly, this extends the life of an engine oil from 5,000 kms to
10,000 kms which in turn increases ones savings on time and money (Bajajatuo
website 2011a). Therefore, due to the technology innovation, this becomes a strong
competition advantage for Bajaj.

SWOT analysis
Strong market share provides significant competitive advantage and increases the
companys bargaining power, which in turn helps it to register higher sales growth
and strengthen investor's confidence. However, working in a competitive environment
exerts a continued pressure on the operations of the company, which may result in
downward pricing pressure thereby adversely impacting Bajaj Autos market share
and results of operations. Now the report will analyze the positioning of Bajaj Auto
Ltd (BAL) in the current market set up, evaluating its strengths, weaknesses, threats
and opportunities available.
Strengths
Strong market share
Bajaj Auto is the world's third largest two wheeler manufacturer and the second
largest two wheeler manufacturer in India. The company has a strong market share
in India. In FY2012, Bajaj Auto had a market share of 32.1% in the domestic

motorcycle sales and exports (The Hindu, 2013c). Thus, a strong market share
provides significant competitive advantage and increases the companys bargaining
power, which in turn helps it to register higher sales growth and strengthen investor's
confidence.
Robust brand recognition
The company manufactures and markets scooters, motorcycles, passenger carriers
and goods carriers. It focuses on two-wheeler and three-wheeler motorcycles in the
segment. The three-wheelers segment manufactures goods carrier and passenger
carrier three-wheelers (Bajaj Auto, 2011). Therefore, the company's extensive range
of products and well established brands covering the diverse spectrum of the
automotive market enables it to cater to a wide range of customers and price points
that further strengthens its reach and market position.
Weaknesses
Vehicle recalls impacting the company's reputation.
The company announced a number of safety recalls recently. The recall was due to a
problem with the starter motor that can lead to starting problems. Hence, significant
product recalls such as these would negatively impact the consumer confidence in
Bajaj Auto's products which would negatively influence the company's brand image
(Business Source Premier, 2012).
Labor dispute affecting production
The company has been involved in a conflict over wage and labor issues and it has
been suffering low bargaining power due to existence of collective bargaining
agreements and labor unions (The Hindu, 2013). Therefore, such labor issues disrupt
operations which can hinder the reputation of Bajaj Auto (The Hindu, 2013a). Further,
these strikes would have a detrimental effect on the companys overall production
output and its revenues in the near future.
Opportunities
Growing two wheeler market in India
The Indian two wheeler market has witnessed a strong growth in the recent past and
the trend is likely to continue in the future. This was primarily due to the government
stimulus packages, better demand and lower loan interest rates (Mena Report,
2013). Hence, the growing demand for two wheelers signifies an opportunity for the
company to further exploit on this market and expand its revenues and profits.
Launch of new vehicles expands the company's product portfolio
It is vital for any automotive company adopting new technology and launching new
models as per the customer requirement in order to survive and compete with other
market players in a highly competitive automobile market. Thus, launching of new
and innovative models of vehicles and technologies would allow the company to
strengthen its portfolio of two wheeler vehicles by attracting new customers, while
retaining its existing customers.
Threats
Intense competition in the two wheeler market
The two wheeler market in India is highly competitive with fuel efficiency and price
being crucial considerations for success. In the Indian two wheeler market, the
players include global giants like Honda, Suzuki and Yamaha as well as Indian

players like Hero Motocorp and TVS Motor (Business Source Premier, 2012).
Growth in number of products in the market increases the bargaining power of the
customer.
The extent of pricing reductions varies from year to year, and takes the form of
reductions in direct sales prices (Business Source Premier, 2012). Therefore,
working in such a competitive environment exerts a continued pressure on the
operations of the company, which may result in downward pricing pressure thereby
adversely impacting its market share and results of operations (Business Source
Premier, 2012).
Extensive environmental regulations
The company is exposed to extensive governmental regulations concerning vehicle
emission levels, noise, safety and levels of pollutants generated by its production
facilities. Hence, more stringent vehicle emission regulations in the future may lead to
significant compliance costs for Bajaj Auto, which may have an adverse impact on
the profitability (Business Source Premier, 2012).
Generic Strategy
Usually generic strategy is considered as competition strategy. It is composed of
three main parts .The first one is cost leadership, meaning that the company is able
to remain its competition advantages by cutting costs, nevertheless it also could
make profits which are higher than average profits. A following one is differentiation.
It defines that the company could make available inimitable products, service or
design which could defeat competitors. Finally, the last one is focus. This approach
involves the company focuses on customers or certain particular section, as well as
making more profits than other competitor such as customize (Doole and Lowe,
2012).
Growth strategy
Ansoffs growth matrix is a kind of growth strategy, and it could categorize from four
elements, which are market development, market penetration, product development,
and diversification.
Market penetration offers increased sales volume in current markets through
aggressive marketing.
Market development builds sales in new markets with existing products.
Product development involves selling new or improved products in existing markets.
Diversification refers to developing new products and new markets while integration
is growth within the value chain.
Market entry:
Globalization has increased the competition amongst firms. There are more and
more companies which are motivated more each day to conquer foreign markets and
enlarge their presence on said markets. For multiple reasons, companies adopt
modes to enter foreign markets and find new channels of distribution daily. Choosing
the right and appropriate market entry strategy has a growing importance (Viktor,
2010).
A firm planning market entry can attempt to develop a product that is either similar to
the incumbent's existing offering (imitation) or entirely novel (innovation) (Ofek,
2008).

Segment and positioning:


Doole and Lowe (2012) also gave strong options that segmentation, targeting and
positioning are the three stages for marketing strategy development. Segmentation is the
art of discerning and defining significant differences connecting groups of customers to
variety the establishments of a further spotlighted marketing effort. Segmentation and
positioning are often considered by 4PS analysis. In other word, it means that price,
product, place and promotion should be considered.
Price: In developing countries, the motorcycle will be used for transportation and who
owns low-income customers cannot afford the high prices, therefore, motorcycle should
be cheap economic, in order to meet market demand.
Product: Bajaj Auto focuses on motorcycles in the two-wheeler and three-wheeler
segment, and it is necessary for Bajaj to add more new features to its existing
product line. Also, they should create a great sense of joy in their customers by
offering unmatched product features and service that will make their customers loyal
to the brand and this will greatly help Bajaj in increasing its market share.
Place: try and push for tie-ups and Joint Ventures in foreign market and try and
increase its export base. And Increase its dealer network to tap rural growing markets
by going in for tie-ups and offering better margins to dealers.
Promotion: Increase and improve its selling network, and take full advantage of media
to enhance brands fame. Moreover, the company can take more brands activities to
catch peoples eyes.

Recommendations
The impression of Bajaj in the minds of the public is that it is a moped and a threewheeler company, and it is a very orthodox image in the minds of the youth. It should
use a powerful brand ambassador and individual whom the youth can relate with.
Bajaj should aggressively push sales of higher margin products and launch new
products in niche segments.
Bajaj should also try and push for tie-ups and Joint Ventures in foreign market and
try and increase its export base. And Increase its dealer network to tap rural growing
markets by going in for tie-ups and offering better margins to dealers.
Bajaj should look for possible mergers and acquisitions. Try and improve its
distribution network and provide it with products in niche segments and help increase
production capacity and provide economies of scale
Review product mix; Focus on research and development to bring new products in
market
Increase focus on exports and penetrate new markets:
With domestic demand for two-wheelers slowing down, it would be increasingly
important for BAJAJ to look beyond boundaries to partially mitigate the slowdown.
BAJAJ would accordingly have to develop products suitable for different markets;
high investments are required for setting up manufacturing facilities and for building a
reasonable level of brand equity. Till now BAJAJ focused only on economy class and
developing country markets, but now in those segments it is facing competition from
cheap Chinese players. Therefore need arises to penetrate new markets like USA
and UK.
The key to Bajaj real success lies in Research and development. How it is able to
use value analysis and value engineering by adding new features to its existing

product line and how it is able to come out with new product for different niche
markets. Analysis of different alternatives like outsourcing, in-house, purchase and
tie-up should be evaluated
From the survey, it is seen that Bajaj is only able to somewhat satisfy their
customers from their products. They need to create a great sense of joy in their
customers by offering unmatched product features and service that will make their
customers loyal to the brand and this will greatly help Bajaj in increasing its market
share.
Bajajs product prices are in comparison with its leading competitors. The problem is
that consumers do not think that Bajaj has that much value and hence prefer to buy
other brands. Bajaj need to offer more competitive pricing and better promotions to
sell their motor cycle better.

Conclusion:
Judging from different analyzation ways and views such as Pest Porters Five
Forces and SWOT analysis this essay clearly displays the segmentation and
positioning of Bajajas well as analyzes several applicable venues for Bajaj to aim
the international market with feasible market strategies. Finally, Bajaj shall also
should pay more attention to the importance of Relationship Marketing in its goal of
Bajaj going global.

References:
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Business Source Premier, EBSCOhost.
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[Online]
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pid=1ED25749-2957-4179-BEFB-2DC924CA5A8B [Accessed 28 December 2013]
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'Strike ends at Bajaj plant', (2013a), The Hindu (English), (2013a), Academic
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Management [Online] Available at http://www.google.co.jp/books?
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Academic OneFile, EBSCOhost