Auto Ltd.

Submitted By:
Krishnanand Pai Sagar Gupta Ayush Agarwal Abhinav J Praval Kumar

Company Background
Bajaj Auto came into existence in 1945 It started off by selling imported two- and threewheelers in India. In1959, started to manufacture two- and threewheelers and it went public as Bajaj Auto Ltd (BAL) in1960 Focus on
Low cost and prices Improved quality Concentrating on two and three wheelers Economies of scale

BAL Products
Focused on
Two and three wheelers Simple technology Economically priced vehicles High life time(10-15 yrs) High quality (Zero Defects) Continuous Improvement Modernized and increased production efficiencies

Auto Market and Consumer Segments

Second largest after Scooters targeted Family man , mileage, China low maintenance key Decreased purchases attributes Motor cycles Young and due to economic single males, more fuel recession efficient and better value Unregulated imports for money Increased projected Mopeds teenagers and women , cheapest two Sales (Table B) wheeler available

BAL in India
Focus on
Providing customers what they want Continuously improving features Periodic introduction of new products Effective distribution

Lacked skill compared to Japanese competitors focus on research agreements Developed a network of 330 dealers and 800 licensed service centers. BAFL, to provide consumer finance

The Global Market

Two Segments for the two-wheeler market: Developed Countries Europe, Japan, N America and Australasia Developing Countries S E Asia and China; Africa and the Middle East The global market had declined from 15M units in 1982 to 11M in 1992 Five Japanese players dominated 75% of the market BAL had 33% share in the threewheeler market with Piaggio being the main competitor Bdesh and Sri Lanka were BALs major 3-wheeler export markets

Global Market share for 2wheelers

Honda Suzuki

Yamaha
BAL Piaggio Others

Exports at BAL
Started in 1975 by exporting 1500 three-wheelers to Bangladesh In the same year, had technical licensing agreements in Indonesia and Taiwan A similar agreement established with Bangladesh was BALs only existing agreement in 1993 Bajaj supplied private licensees with CKD units, which were assembled in their home countries In 92 exports were 2% of sales and BAL wanted to increase it to 15% by 98

BALs Distributorship
Sold to 52 countries through 34 non exclusive and 17 exclusive distributorship Established agreements with one distributor to maintain motivation Advertisement through distributors First distibutorship established in Sri Lanka in 79 Distibutor Selection Criteria were similar to those used in India Principal terms of BAL foregin distributorship agreements are in Exhibit 8

Developed Countries
The US: 50cc and over 250cc were the large two-wheeler segments
50cc dominated by Japanese players BAL had no product in the above-250cc category

Japan: 71% of the sales of two-wheelers was of the 50cc model

4 main players held 80% of the market Stringent product standards and high cost of freight implied difficulties in penetration

Europe: Again 50cc was the dominant model

But it was being replaced by automatic scooters Eastern European Countries were a potential market but consumers had lesser buying power Expected to emerge as important markets with the right political and economic changes by 1997

Market for 3-wheelers was non-existent in developed countries

Selling in Developed Markets

The Product:
Exacting Performance requirements Tough regulations on factors like emission, noise, braking and electricals

The Customer:
Mopeds under 50cc Teenager Market Fashionable and peppy Latest models and features Want a good after-sales service Luxury and fun vehicles used for short distances within cities

Distribution:
Reach and after sales service were critical Dealers have product liability

Developing Countries
Southeast Asia:
Imports of two-wheelers were restricted by tariff barriers or bans Japanese manufacturers had established local JV production facilities China was the largest market with intense competition

African Countries:
Difficulty of access to foreign exchange and low purchasing power Potential for exporting CKDs to Middle east and Noth Africa for GDP per capita was higher

Latin America:
Attractive market for scooter products and account for about one-third of BALs export volumes (Ex. 9)

Selling in Developing Countries

The Product:
Performance regulations less stringent than in developed countries Makes it more attractive for BAL

The Customer:
Requires both two- and three-wheelers Two-wheelers are either family vehicles or the work horse Low price, fuel efficiency and durability are key Model changes are not preferred Ability to repair product cheaply is critical Personal transportation or first and only vehicle

Distribution:
Similar requirements as in India Spare parts availability and service are critical BAL has sufficient capabilities to expand into these markets

Europe and Latin America

Strategic Options
1. Focus on domestic market with exports on opportunistic basis 2. Pursue exports in developing countries that require minimal adaption of product line 3. Promote exports to developed countries