“Fact is, Bajaj was slow in reading the shift from scooters to motorcycles.”

- An articles in Business Today, in 2001

2006 Surprise

Discontinuation of its flagship scooter model – “Chetak”

Chetak, a geared scooter, reigned over the Indian two wheeler market in the late 1970s to early 1990s

As per Rajiv Bajaj, MD, BAL, company had produced 10 million Chetak scooters before it was discontinued.

• BAL – an importer of two and three wheelers

Mid 1940s

DOMINANCEOF

SCOOTERS

In 1970s and 1980s Most preferred by middle class Indians

because of their :- Durability Low maintenace cost Versatility

Some not so favourable reason of motorcycles:- Costlier Heavier Not as fuel efficient as scooter

Here comes MOTORCYCLE

In 1990s, shift in consumer preferences

Reasons for the shift Demographic change Economy was growing Newer models of motorcycles Features of scooters remain unchanged

BACKGROUND

1926 •Bajaj Group formed by Jamnalal Bajaj.

1945•Kamalnayan Bajaj set up Bachraj Trading Corp. Ltd. (BTCL) to import and sell 2 & 3 wheelers.•Continued till 1959

1959 •Secured license from GOI to manufacture 2 and 3 wheelers.

1961• Technical collaboration

with Piaggio for manufacturing scooters.

1971

• Till 1971, scooters sold under VESPA brand.

• Agreement with Piaggio ended, started selling scooters under Bajaj brand.

1972 • Bajaj Chetak introduced – a two stroke engine

1975 •BAL entered into a JV with Western Maharashtra Development Corporation (WMDC)•Two wheeler brand – PRIYA

1976 •Introduction of another geared scooter- SUPER

1980 •Bajaj America Inc. was set up as subsidiary of BAL

1986 •Entered into a technical agreement with Kawasaki Heavy Industries of Japan to produce motorcycle.•First model – Kawasaki Bajaj KB100•Bajaj M80 – an 80cc Moped

1990 •Introduction of small scooter or scooterette - SUNNY

1994 •Another Geared scooter was launched – Bajaj CLASSIC

1997-98 •Two motorcycle models were launched – Bajaj BOXER & CALIBER•Two scooter models – LEGEND (India’s 1st 4 stroke scooter) & SPIRIT(Gearless Scooterette)

1998 •Tie-up with Cagiva, an Italian co., to improve its design capabilities.•Thus more stylish version of Chetak, Super and Classic were launched.

1999 •Launched a geared scooter - BRAVO

2000 •Launched a gearless scooter with 4 stroke scooter and self start - SAFFIRE

2001•Launched PULSAR (150 and 180 cc engine capacities)•Launched ELIMINATOR (175cc engine)•Both priced high and targeted premium segment.

2003 •Introduced Digital Twin Spark Ignition (DTSi) technology in its PULSAR model.

2004 •Created a new logo and brandline in a bid to renew its brand identity.•New logo symbolise confidence and excitement.

2005 •SAFFIRE was relaunched as the WAVE, with DTSi technology.•Two more motorcycle, AVENGER & DISCOVER launched.

2006 •BAL launched the PLATINA, a 100cc motorcycle.

2007 •Bajaj Pulsar-200 (Oil Cooled), Bajaj Kristal, Bajaj Pulsar 220 DTS-Fi (Fuel Injection) , XCD 125 DTS-Si •Acquired 14.5% stake in KTM Power Sports AG

2008 •Bajaj Discover 135 DTS-i - sport (Upgrade of existing 135cc model)•The demerger of Bajaj Auto Ltd into—Bajaj Finserv Ltd (BFL), Bajaj Auto Ltd (BAL), and Bajaj Holdings and Investment Ltd (BHIL)—shares listing on May 26, 2008

2009 •Bajaj Pulsar 135(December 9) (January) Bajaj XCD 135 cc , Bajaj Pulsar 150 DTS-i UG IV, Bajaj Pulsar 180 DTS-i UG IV, Bajaj Pulsar 220 DTS-i , Bajaj Discover 100 DTS-Si

PRODUCT PORTFOLIO

Consumers and market segmentsVehicle Target Characteristics

Scooters Targeted the “family man” aged between 27-38 yrs.

Word-of-mouth recommendations, brand name, features such as mileage, low maintenance, and high resale value.

M-80 Rural consumers Fuel efficiency and durability.

KB-100 Young single male consumers (21-30 yrs of age)

Power and style, better value for money.

Mopeds Broader customer segment

Cheapest two wheeler available

Sunny Teenagers and women, people over 55 years

Style and trendy features,Low cost means of personal transport.

“WHATEVER PRODUCT OR SERVICES A CO. OFFERS, IT MUST MEET THE CUSTOMER ‘S WANTS IN THE MOST SATISFACTORY MANNER. THAT SHOULD BE THE AIM OF THE COMPANY” ..RAHUL BAJAJ-1998

Still they failed……..why?

“My marketing department? I don’t require it, I have a dispatch department. I don’t have to go from house to house to sell..Rahul Bajaj -1982 

Why Bajaj failed to see tomorrow’s market? :

Unable to analyze changing external environment (PEST) Inertia Changing market structure-from monopoly to oligopoly 

BAL AND THE INDIAN TWO – WHEELER MARKET

Mid- 1950 to 1980

Indian Industry operated under “License Raj”. Production capacity determined by GOI. Domestic market protected from foreign

competition by imposing restriction and tariffs.

One scooter manufacturer in India – Automobile products of India (API),

Three other motorcycle manufacturers like Enfield India Ltd, Ideal Jawa Ltd and Escorts Ltd.

In 1960 - 1970

GOI encouraged local companies to collaborate with foreign firms.

In 1961, BAL collaborated with Piaggio, manufactured Vespa

List of two – wheeler

1955 - Enfield India Ltd collaborated with Enfield Ltd, UK.

1969 – Automobile products of India collaborated with Innocenti Ltd

Italy. Escorts Ltd with CEKOP, Poland. Ideal Jawa Pvt Ltd Collaborated

with Jawa Ltd, Czechoslovakia

In 1970s, scooter became popular and preferred over motorcycle.

Scooter were cheaper than motorcycles More economical to run as well as

maintain Motorcycles were bulky and had more

weight as compare to scooter

Consequences

High sales growth rate in two wheeler around 15%

This attributed to inefficient public transport system, which increased demand for personal transport .

Limited supply of car due to License Raj.

Due to high fuel prices, people preferred two wheeler.

In 1970s, BAL started manufactured scooter under Bajaj brand…..

Overtook API In sales. Demand for two wheelers outstripped

supply Resulted , customers had to wait for a

couple of years for vehicles to be delivered.

Waiting period of Bajaj Chetak between 10 to 12 years

In 1970 - 1980

Indian industry restricted through legislations such as MRTP Act and FERA.

Foreign companies were not keen on parting with their latest technologies/designs.

Resulted , dependence on foreign partners for technology.

Due to obsolete technology , sales of motorcycles declined.

As compare to motorcycle, scooter segment were technology more efficient, and attracted new entrants like

scooter India limited (SIL) kinetic Engineering limited (kinetic)

In 1980s

The GOI focused on modernization , technology up gradation and healthy competition .

Allowed foreign auto companies (mostly from Japan) to enter joint ventures with Indian companies .

The foreign firm came with latest technology and efficient production, which improved the quality.

Resulted the Introduction of new models with new contemporary technology, styling and greater fuel efficiency.

During 1980 - 1990

BAL continued to dominate the two wheeler market

The Bajaj chetak and the Bajaj super, was most successful for middle class Indians due to their durability and versatility.

Cheaper to own and maintain, spare parts were easily available.

Positioning of Brand

The ‘ Hamara Bajaj ‘ ad campaign launched, which contributed in strengthening the Bajaj

brand.

The ad campaign was successful in positioning the brand as reliable and trustworthy one.

THE TURNING POINTOFBAJAJ AUTO LIMITED

Early 1990’s saw a recession in the Indian Two-wheeler Market.

Overall sale declined by 15% in 1991 and 8% in 1992.

Rise in fuel price in this period resulted in consumers Placing greater emphasis on fuel efficiency when purchasing a new two wheeler

However, even as late as 1997-1998, the scooter segment was the largest sub-segment in the two-wheeler market

Two-wheeler Market Overview for Year 1997-98

42%

37%

21%

Segments

Scooters

Motorcycles

Mopeds

Scooter Segment Landscape

60%

24%

9%2%

Manufacturers

BAL & MSLLMLKinetic HondaTVS Suzuki

In the Late 1990s, motorcycle became the fastest growing segment of the two-wheeler market.

Motorcycles were no longer perceived as accident-prone, non-utilitarian and bulky

Instead people started buying them for fuel efficiency, power and even for their style.

New Market segment

The Indian economy was beginning to grow rapidly

The growth was palpable even in small towns and rural areas.

Number of households saw their income rise, thus opening up a new market for two-wheelers.

Changing Preferences

Motorcycles were preferred to scooters because of poor road conditions.

Motorcycles, with better ground clearance, stronger suspensions and larger wheel bases, performed well on village roads.

Their fuel efficiency was an added bonus.

It would fetch good selling value.

Changing Demographics

The proportion of younger people to overall crowd was increasing.

Motorcycles, with their improved styling and power attracted young men more than the staid products sold by BAL and other scooter manufacturers.

Lower interest rates on vehicle loans made motorcycles more affordable.

Motorcycles were also fast replacing scooters as the preferred dowry item.

New Phase of Two Wheeler Industry

The sale of motorcycle surpassed that of scooters for the first time in 1999.

Hero Honda became the new market leader with its splendor, a 100cc motorcycle

The company’s communication campaign-”Fill it, shut it, forget it”- highlighted the fuel efficiency and the low maintenance costs of the model

Sanjeev Bajaj’s view on Demand Shift

“With the consumer preference changing from scooters to motorcycles we were unable to hold onto the number one position and had to relinquish it a company(Hero Honda) that had only motorcycles in its product portfolio”

Sales Trend between 1996-2000(units)

Vehicle Type

FY’96

FY’97

FY’98

FY’99

FY 2000

Scooters 1,222,6

49

1,301,0

51

1,262,699 1,325,868 1,253,96

9

Motorcycles 809,527 978,682 1,131,314 1,395,657 1,796,73

4

Mopeds 626,112 683,756 648,842 681,902 726,075

Total Two-

wheelers

2,658,2

88

2,963,5

89

3,042,85

5

3,403,42

7

3,776,7

78

Fallout of scooter market

In 1999-2000, Scooter sales fell by around 75,000 units, while motorcycle sales increased by more than 400,000 units.

The shift in demand took its toll on BAL, the market leader till then.

A new set of emission norms, Bharat Stage II, for petrol two-stroke engines came into effect in 2000 because of which scooters with two-stroke engines fell out of favor.

The was a blow to BAL, which primarily sold two-wheelers with two-stroke engines

BAL FIGHTS BACK

Kawasaki 4S-1991 Market Segmentation: Middle age people mainly

fathers Positioning: As first bike of Bajaj Competitors: Yamaha & Hero Honda

Kawasaki Baja Boxer – 1997 Market Segmentation : Rural Market, Low

Income Group Positioning: Value for money, High Mileage Competition: Hero Honda Dawn & Suzuki MX100

Bajaj Fight Back (Contd.) Bajaj Legend – 1998 India’s first four stroke scooter

2000 - Bajaj Saffire 2001 - Eliminator, Bajaj Pulsar

Bajaj Kawasaki Caliber – 2003 Market Segmentation: Executive Class Competitor: Hero Honda Splendor Positioning: High Speed & stylish

Repositioning

2001 – New advertisement showed diverse product line

Launch of Pulsar & Eliminator Changed tagline for bike segment Increase in share via pulsar targeting

India, Indonesia and Malaysian markets.

Matching the Competitor

……………..Pulsar

Launched in 2001 Jointly designed by Bajaj Auto &

Tokyo R&D Appearance Performance Segment Targeting Youth via Classic

Advertising Campaign “Definitely Male”

Continuous Development 2003 : DTSI (Digital Twin Spark

Ignition) technology introduced Vendor Development and

rationalization 2004 - Bajaj CT 100, New Bajaj

Chetak 4-stroke with Wonder Gear, Bajaj Discover DTS-i

2005 - Bajaj Wave, Bajaj Avenger, Bajaj Discover

2006 - Bajaj Platina

Transformation

2007

48 Year Logo replaced Distinctly Ahead Campaign launched Core Values: Speed, Innovation and

Perfection Vision communicated through

changed commercials

Positioning

New Models Launched

2007 - Bajaj Pulsar-200 (Oil Cooled), Bajaj Kristal, Bajaj Pulsar 220 DTS-Fi (Fuel Injection) , XCD 125 DTS-Si

2008 - Bajaj Discover 135 DTS-i - sport

2009 - Bajaj Pulsar 135, Bajaj XCD 135 cc , Bajaj Pulsar 150 DTS-i UG IV, Bajaj Pulsar 180 DTS-i UG IV, Bajaj Pulsar 220 DTS-i , Bajaj Discover 100 DTS-Si.

Ansoff Model

BCG Matrix

THE FALL OF AN ICON:

•In January 2006, BAL announced discontinuation of Chetak’s production.•BAL closed a major chapter in its history. •Rajiv said, "It is a history I would like to forget. My company has lived too long on nostalgia…holding on to anything from the past is a sign of weakness."...

Reasons for chetak’s phase out

Upgradation of company’s scooter portfolio

Analysts viewpoint:- Design- Technology- Innovation- Sense of complacency- Failure to keep up with customer needs

After the phase out

BAL just left with “The Wave” in scooter segment

Several successful models in moto motorcycle segment

In 2005-06, HMSI- the leader in scooter segment

OUTLOOK

Late 1990s,motorcycles- The new favorites in the Indian two-wheeler market.

BALs motorcycle segment was doing well in the mid 2006.

Demand for gearless scooters on a rise- 20 % YOY increase in sales- better technology & trendy styling

Competitor’s moves

In January 2006, Hero Honda launched Pleasure

“Just4her” chain of showrooms In April 2006, Kinectic launched the

Blaze Yamaha planning to launch Neo, Fino

and Spark

BAL’s Response Unveiled two new gearless scooter

models in 2006- Kristal DTS-I to target teenage girls

- Blade DTS-I to target young males

Market Share at All-time low

HMSI50%

TVS33%

Hero Honda10%

Kinectic5%

Bajaj2%

Scooter market share in April-august 2006

Plans in 2006-07

In June 2006, raise production capacity Focus on motorcycle segment Heavy investments in infrastructure

and R&D Improve presence in global market Analysts did not expect the demand for

scooters to disappear

Market Shares of the major players in the two wheeler market segment in 2008

DOMESTIC MOTORCYCLE INDUSTRY

20002001200220032004200520062008200920100

1000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

13968951733147

33964093898751

4725996

5826678

6586443

57569275826816

7340417

Motorcy-cle do-mestic industry projec-tions

BRAND STRATEGY-Two broad motorcycle segments

Commuter Sports

83% of market share Target middle age &

middle class Semi-urban, rural Frugal, utility and

value offerings Discover

17% of the market share Target youth Mainly urban Premium, stylish and

feature rich bikes with loads of excitement value

Pulsar

BAJAJ IDEA

Attack strategy- To upgrade the commuters to experience bigger and sportier bikes

Two stepI. Feature upgradation- Discover 100II. Experience upgradation- Discover

150

The consumers were excited….

Reasons behind success of discover-100

DTS-Si Engine

On road mileage of 80kmpl

Long Wheelbase

Nitrox suspension

5 Speed gear box Electric Start

All these at a price of Rs. 41736 : An unbeatable value for money

Results of feature upgradation Attains new milestone in April ’10

Discover becomes the 2nd

largest selling brand

And Now…Experience upgradation

DISCOVER-150 Excitement per litre

145cc DTS-Si Engine

On-road mileage of 65 Kmpl

Disk BrakeDark Tone Sporty

Graphics

Wider Rear Tyres

All these at a price of Rs. 46000 (Ex-showroom Delhi)

DEFENSE STRATEGY-Pulsar

• Up the benchmark Fastest Indian: Top speed-145 km/hr Pulsar Stunt mania• Expand the category-Pulsar 135 LS

MAJOR INITIATIVES FOR 2010-11Actions 2009-10 2010-11

1. New Products

Discover 100 -

Pulsar 135 LS -

Platina 125 -

Discover 150 -

2. Quality

Oil Frequency Reduction (From 5000 Km to 10000 Km)

- -

Service Frequency Reduction (From 2500 Km to 5000 Km)

- -

3. Network

Dealers Expansion (10% increase) - -

Secondary network Quality up gradation (RSO‘s to ASC’s)

-

Continue…

Actions 2009-10 2010-11

4.Brand

Twin brand strategy

•Pulsar - -

•Discover - -

5. Customer Finance(Direct Cash collection)

850 ASC’s offer DCC model - -

OUTLOOK FOR YR 2010 – 11

• Industry Estimated to grow at 11% to 15%• Discover 150 will further grow our Commuter Segment market share• Pulsar market share will continue to be 50% +• Discover - Pulsar proportion will continue to grow in Bajaj Domestic Portfolio

Continued…ØThe case traces the company's rise to dominance in the scooter segment of the market, and its eventual fall, against a backdrop of changes in customer tastes and preferences.ØIt describes the reasons for the shift in demand and discusses the initiatives that the company undertook to regain lost ground. The case also discusses the competition in the Indian scooter market, and ends with a brief discussion on recent developments in the two-wheeler market.

SWOT ANALYSIS

Strength

"Bajaj" is a well established Brand name in the scooter segment.

Bajaj Auto is a cost-effective producer in the two wheeler market.

It has a huge market share in the scooter segment of the two-wheeler industry. This acts as a cushion for the company in their efforts of foraying into the motorcycle segment.

Bajaj has established a wide distribution network for the scooter segment which will favor them in their efforts in the motorcycle segment.

Weakness

Bajaj has become a generic name associated with the scooters and that needs to be changed in the minds of the consumers before it could expect a great success in the motorcycle segment.

Bajaj is dependent on its foreign counterparts for technological support. This needs to be addressed as it might be crucial when the foreign players enter the Indian market directly.

Opportunities

The motorcycle segment is expected to grow at a considerable rate and this would provide a good opportunity for Bajaj Auto to increase its market share in this segment.

The growing gearless trendy scooters and scooterette market.

Can use the existing R&D capabilities for new models.

Threats

Entry of Multinational companies, especially Chinese ones, in the motorcycle segment will stiffen the competition and will hamper the efforts of Bajaj to establish itself in the motorcycle segment.

The competition catches-up any new innovation in no time.

Tough competition faced by domestic companies like Hero Honda, TVS, Kinetic etc.

THANK YOU

Mayank BasraNeha Gupta

Pallavi MishraPratik Arora

Riddhi Parekh