Project of Sm Bajaj

8/13/2019 Project of Sm Bajaj

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A

Project report on

Submitted By:

In partial fulfillment of the requirements for the subject

Strategic Management for the award of the degree of MBA

Submitted to: Prof. Dr. Jignasa Savalia

Strategic Management Cycle of Bajaj Auto Lt


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Declaration

The project report entitled Strategic Management Cycle of Bajaj Auto Ltd. has been

submitted to Gujarat Technological University, Ahmedabad in partial fulfillment for the award

of degree of Master of Business Administration. I the undersigned hereby declare that this report

has been completed by me under the guidance of Prof. Jignasha mam (Faculty Member,

Shayona Institute of Business Management, Ahmedabad)

The report is entirely the result of my own efforts and has not been submitted either in part orwhole to any other institute or university for any degree.

Date:

Place: Ahmedabad


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PREFACE

As it is always said that if you give some-one theory knowledge it will make personunderstandwell.But if you give some-one theory as well as practical knowledge then it will helpthe person to understand and remember that always.

In the same way to get practical knowledge,the report which we prepare not only make usunderstand the various functions but also gives us different vision regarding them and along withit gives us experience of practical assignment and managers work.

By preparing report on Analytical Study on Strategic Management Cycle of Bajaj Auto Ltd.we have tried to develop skill to understand well and also how to implement theoreticalknowledge work.

For this we are thankful to Gujarat Technological University for including such a project aspractical studies in the syllabus of M.B.A.


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Acknowledgement

The succession completion of this report would not have been possible without co-operation andsupport of our professor , friends and our institute.

We forward gratitude to respected director of our institute.

We are heartily thankful to the management for providing us the opportunity to make a study topractical in their organization.

We express our sincere thanks to the company who have given us all the information on-line. Weare also thankful our professor out with whose help, this becomes possible and who provided fullguidance, co-operation and valuable suggestion about company report.

We are also thankful to our college friends and all those who have helped us directly orindirectly in the preparation of this report.


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Executive Summary

In our project we have conducted a research on how bajaj auto ltd works By using stretegic

management & their different moves..

Hence on the basis of the Information we have found out our finding and have done an in-depth

analysis on Strategic Management Cycle of Bajaj Auto Ltd.. It is followed by recommendations

and conclusion.


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TABLE OF CONTENTS

1. Objective of SM

2. Introduction of ABC Co.

3. History of ABC Co.

4. Strategic Thinking

i. Vision

ii. Mission

iii. Corporate Purpose

iv. Values: (Standard of Conduct, Law, Employees, Consumers, Shareholders, BusinessPartners, Community Involvement, Public Activities, the environment, innovation,competition, business integrity etc.)

5. Strategic Planning

i. Strategy adopted by ABC Co.

ii. Action plan by ABC Co.

iii .Responsibilities of ABC Co.CSR (Internal as well as External)

iv .Michael Porters 5 Forces analysis

v. McKinseys7S Model

vi. SWOT Analysis of ABC Co.

vii. PEST Analysis

viiiBCG MATRIX

6.Analysis of Strategies of ABC Co7. Strategic Implementation

i. Resource Allocation

7. Strategic Evaluation

i .BalanceScorecar


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1. OBJECTIVE OF SM :

Statements of vision tend to be quite broad and can be described as a goal that representsan inspiring, overarching, and emotionally driven destination. Mission statements, on theother hand, tend to be more specific and address questions concerning the organizations

reason for being and the basis of its intended competitive advantage in the marketplace.Strategic objectives are used to operationalize the mission statement. That is, they help toprovide guidance on how the organization can fulfill or move toward the high goals in

the goal hierarchy-the mission and vision. As a result, they tend to be more specific and

cover a more well-defined time frame.

Setting objectives demands a yardstick to measure the fulfillment of the objectives. If anobjective lacks specificity or measurability, it is not very useful, simply because there isno way of determining whether it is helping the organization to move toward theorganizations mission and vision.

Statements of vision tend to be quite broad and can be described as a goal that representsan inspiring, overarching, and emotionally driven destination. Mission statements, on the

other hand, tend to be more specific and address questions concerning the organizationsreason for being and the basis of its intended competitive advantage in the marketplace.Strategic objectives are used to operationalize the mission statement. That is, they help toprovide guidance on how the organization can fulfill or move toward the high goals inthe goal hierarchy-the mission and vision. As a result, they tend to be more specific andcover a more well-defined time frame.

.


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2. INTRODUCTION OF BAJAJ GROUP :

The Bajaj Group is amongst the top 10 business houses in India. Itsfootprint stretches over a wide range of industries, spanning automobiles(two-wheelers and three-wheelers), home appliances, lighting, iron andsteel, insurance, travel and finance. The group's flagship company, BajajAuto, is ranked as the world's fourth largest two- and three- wheelermanufacturer and the Bajaj brand is well-known across several countriesin Latin America, Africa, Middle East, South and South East Asia.Founded in 1926, at the height of India's movement for independence fromthe British, the group has an illustrious history. The integrity, dedication,resourcefulness and determination to succeed which are characteristic ofthe group today, are often traced back to its birth during those days ofrelentless devotion to a common cause. Jamnalal Bajaj, founder of thegroup, was a close confidant and disciple of Mahatma Gandhi. In fact,Gandhiji had adopted him as his son. This close relationship and his deepinvolvement in the independence movement did not leave Jamnalal Bajajwith much time to spend on his newly launched business venture.His son, Kamalnayan Bajaj, then 27, took over the reigns of business in1942. He too was close to Gandhiji and it was only after Independence in1947, that he was able to give his full attention to the business.Kamalnayan Bajaj not only consolidated the group, but also diversifiedinto various manufacturing activities. The present Chairman of the group,Rahul Bajaj, took charge of the business in 1965. Under his leadership, theturnover of the Bajaj Auto the flagship company has gone up from INR.72million to INR. 120 billion, its product portfolio has expanded and thebrand has found a global market. He is one of Indias most distinguishedbusiness leaders and internationally respected for his business acumen andentrepreneurial spirit.


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3.HISTORY OF BAJAJ AUTO LTD

Bajaj Auto is a $2.3 billion company founded in 1926. It is world?s fourth

largest two- and three-wheeler manufacturer. Bajaj Auto has three plants in all, two at Waluj and

Chakan in Maharashtra and one plant at Pant Nagar in Uttaranchal.

The company is into manufacturing of motorcycles, scooters and three-wheelers. In India, Bajaj

Auto has a distribution network of 485 dealers and over 1,600 authorised services centres. It has

171 exclusive dealers for the three-wheeler segment .It has total 3750 rural outlets in rural areas.

The company has opened 11 retail stores for bikes across the country, exclusive for high-end and

performance bikes. It has opened these stores under the name ??Bajaj Probiking??

in cities like Pune, Nashik, Ahmedabad, Chennai, Hyderabad, Kolkata, Navi Mumbai,

Chandigarh, New Delhi, Faridabad and Mangalore.

The Bajaj brand is well-known across several countries in Latin America, Africa, Middle East,

South and South East Asia. It has a distribution network in 50 countries with a dominantpresence in Sri Lanka, Colombia, Bangladesh, Mexico, Central America, Peru and Egypt.

It has technical tie up with Kawasaki Heavy Industries of Japan to manufacture latest models in

the two-wheeler space.

Bajaj Auto has launched brands like Boxer, Caliber, Wind125, Pulsar and many more. It has also

launched India's first real cruiser bike, Kawasaki Bajaj Eliminator.

Bajaj Auto's has in all three plants, two at Waluj and Chakan in Maharashtra and one plant at

Pant Nagar in Uttranchal, western India.

Waluj - Bajaj range of motorcycles and three-wheelers Chakan- Bajaj range of motorcycles

Pant Nagar- Bajaj range of motorcycles

Achievement

1945- On November 29 Bajaj Auto came into existence as Bachraj Trading Corporation

Private Limited.

1948- The company commenced sales in India by importing two- and three-wheelers.

1959- Bajaj Auto obtained the licence from the Government of India to manufacture two- andthree-wheelers.

1960- The company became a public limited company and conducted Bhoomi Poojan of the

Akurdi Plant.

1970- Bajaj Auto rolled out its 100,000th vehicle.

1971- The company introduced its three-wheeler goods carrier.

1972- The company introduced Bajaj Chetak.


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1975- Bajaj Auto & Maharashtra Scooters entered into a joint venture.

1976- The company introduced Bajaj Super.

1977- Bajaj Auto introduced rear engine autorickshaw and achieved production and sales of

100,000 vehicles in a single financial year.

1981- Bajaj Auto launched Bajaj M-50. 1984- On January 19, the foundation stone laid for the new plant at Waluj, Aurangabad.

1985- On November 5, the Waluj plant inaugurated by the erstwhile President of India, Giani

Zail Singh. The company commenced production at Waluj, Aurangabad in a record time of 16

months.

1986- The Bajaj M-80 and the Kawasaki Bajaj KB100 motorcycles were introduced. The

company produced and sold 500,000 vehicles in a single financial year.

1990- The Bajaj Sunny was introduced.

1991- The company introduced Kawasaki Bajaj 4S Champion.

1994- It launched Bajaj Classic. 1995- On November 29, Bajaj Auto turned into a 50-year old company. It signed agreements

with Kubota of Japan for the development of diesel engines for three-wheelers and with

Tokyo R&D for ungeared scooter and moped development. The Bajaj Super Excel is

introduced while Bajaj celebrated its ten millionth vehicle. The same year one million vehicles

were produced and sold by company in that financial year.

1997- The Kawasaki Bajaj Boxer and the RE diesel Autorickshaw are introduced.

1998- The company commenced production at Chakan plant. It rolled out Kawasaki Bajaj

Caliber from its Waluj plant. Bajaj Auto launched Legend, India's first four-stroke scooter

from Akurdi plant. The same year Spirit was launched. 1999- Caliber motorcycle notched up 100,000 sales in record time of 12 months.

2000- The company launched Bajaj Saffire.

2001- Bajaj Auto launched its latest offering in the premium bike segment 'Pulsar'. The same

year Eliminator was launched.

2003- Bajaj Pulsar DTS-i was launched. The company sold 107,115 motorcycles in a month.

The company launched Bajaj Wind 125, The World Bike in India. It launched its Caliber115

'Hoodibabaa!' in the executive motorcycle segment.

2004- Bajaj Discover DTS-I, new Bajaj Chetak 4-stroke with wonder gear and Bajaj CT100

were launched. Bajaj unveiled new brand identity, new symbol, logo and brandline.

2005- Bajaj Discover, Bajaj Avenger DTS-I and Bajaj Wave DTS-I were introduced.

2006- Bajaj Platina was launched.

2007- RE GDi autorickshaw, Bajaj XCD 125 DTS-Si, Bajaj Pulsar 220 DTS-Fi, 200 cc Pulsar

DTS-I and Bajaj Kristal DTS-i were launched. The company also underwent through

revamping of its organisational structure.

2008- Bajaj Platina 125 DTS-Si was launched.


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2009- Bajaj Pulsar 150 & 180 upgrade and Bajaj XCD 135 DTS-Si were launched

2011- April, Bajaj Records its best year ever of 2010.

HISTORY OF RAHUL BAJAJ

Rahul Bajaj

Chairman, Bajaj Auto Limited.Mr. Bajaj (b. June 10, 38) is recognized as one of the most successfulbusiness leaders of India. He heads the Bajaj Group of Companies whichis a leader in a variety of manufactured products and financial services inIndia and abroad including motorized 2 and 3-wheelers, home appliances,

electric lamps, wind energy, special alloy and stainless steel, cranes,forgings, infrastructure development, material handling equipment, travel,general and life insurance and investment, consumer finance & assetmanagement.Mr. Bajaj holds an Honours Degree in Economics from Delhi University, adegree in Law from Bombay University and an MBA from HarvardBusiness School.Mr. Bajaj is the Chairman of the Board of many companies. He waselected to the Upper House of Parliament (Rajya Sabha 2006 - 2010).Mr. Bajaj has received many prestigious awards and recognitions, notablebeing the award of 'Padma Bhushan' by the Government of India in 2001,

Alumni Achievement Award by the Harvard Business School and LifeTime Achievement Awards from Economic Times, Ernst & Young andCNBC TV18. Mr. Bajaj was appointed Knight in the Order of the Legionof Honour by the President of the French Republic.Mr. Bajaj has been conferred Honorary Doctorates by 7 Universitiesincluding IIT Roorkee.The Project Report On Strategic Leaders Page 4Mr. Bajaj was the President of Confederation of Indian Industry (CII -1979-80/1999-2000). He was President of Society of Indian AutomobileManufacturers (SIAM) and Mahratta Chamber of Commerce, IndustryAnd Agriculture (MCCIA) and Chairman of the Development Council for

Automobiles and Allied Industries.Mr. Bajaj was appointed by the Government of India the Chairman (1986-89) of the Government owned domestic carrier, Indian Airlines.Mr. Bajaj was nominated by the President of India the Chairman of theBoard of Governors of the Indian Institute of Technology, Bombay during2003-06.Mr. Bajaj is a Member & former Chairman of the International BusinessCouncil of the World Economic Forum, Geneva and a Member of Harvard


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Business School's Global Advisory Board. He is also a Member of theInternational Advisory Council of the Brookings Institution, WashingtonDC and a Member of the Executive Board of Indian School of Business.Mr. Bajaj spear-heads the CSR initiatives of the Bajaj Group whichinclude Jamnalal Bajaj Foundation and Shiksha Mandal and a number of

social organizations including Bharatiya Yuva Shakti Trust and Ruby HallClinic, a large hospital in Pune as their Chairman.

BAJAJ GROUP OF COMPANIES

Bajaj Auto is the flagship of the Bajaj group of companies. The groupcomprises of 34 companies and was founded in the year 1926.The companies in the group are: Bajaj Auto Ltd. Bajaj Holdings & Investment Ltd. Bajaj Finserv Ltd. Bajaj Allianz General Insurance Company Ltd. Bajaj Allianz Life Insurance Co. Ltd Bajaj Financial Solutions Ltd. Bajaj Auto Finance Ltd. Bajaj Allianz Financial Distributors Ltd. Bajaj Auto Holdings Ltd. P T Bajaj Auto Indonesia (PTBAI) Bajaj Auto International Holdings BV Bajaj Electricals Ltd. Hind Lamps Ltd. Bajaj Ventures Ltd. Mukand Ltd. Mukand Engineers Ltd. Mukand International Ltd. Bajaj Sevashram Pvt. Ltd. Jamnalal Sons Pvt. Ltd.The Project Report On Strategic Leaders Page 6

Rahul Securities Pvt Ltd Shekhar Holdings Pvt Ltd Madhur Securities Pvt Ltd

Niraj Holdings Pvt Ltd Shishir Holdings Pvt Ltd Kamalnayan Investments & Trading Pvt Ltd Sanraj Nayan Investments Pvt. Ltd. Hercules Hoists Ltd. Hind Musafir Agency Pvt. Ltd. Bajaj International Pvt. Ltd. Bachhraj Factories Pvt. Ltd.


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Baroda Industries Pvt. Ltd. Jeevan Ltd. Bachhraj & Co Pvt Ltd The Hindustan Housing Co. Ltd. Hospet Steels Ltd

4. STRATEGIC THINKING :

MISSION AND VISION:

Bajaj doesn't have a straight vision or mission statement. They define it interms of brand identity, brand essence (derived from mission) and brandvalues.

EXPLATIONAL THE STATEMENT:

As per the mission and vision statement the Bajaj group try to focus itsbrand identity and try to improve the brand in national and internationallevel. The Bajaj group focus the people demand and launch the product sothey are easy to fulfil the local demand as well as the international people


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demand.

Brand Identity :

Brand is the visual expression of our thoughts and actions.

It conveys to everyone our intention to constantly inspire confidence.Our customers are the primary audience for our brand.Indeed, our Brand Identity is shaped as much by their belief in Bajaj asit is by our own vision.Everything we do must always reinforce the distinctiveness and the powerof our brand.We can do this by living our brand essence and by continuously seeking toenhance our customers experience.In doing so, we ensure a special place for ourselves in the hearts and theminds of our customers.

Brand Essence :Brand Essence is the soul of our brand.

brand essence encapsulates our mission at Bajaj.It is the singular representation of our terms of endearment with ourcustomers.It provides the basis on which we grow profitably in the market.Our Brand Essence is Excitement.Bajaj strives to inspire confidence through excitement engineering.Blending together youthful creativity and competitive technology toexceed the spokenand the implicit expectations of our customers.By challenging the given. By exploring the unknown and thereby

stretching ourselvestowards tomorrow, today.

Brand Values :

We live our brand by its values of Learning, Innovation, Perfection, Speedand Transparency.Bajaj will constantly inspire confidence throughexcitement engineering.

Learning :

Learning is how we ensure proactivity. It is a value that embracesknowledge as the platform for building well informed, reasoned, anddecisive actions.

Innovation :

Innovation is how we create the future. It is a value that provokes us toreach beyond the obvious in pursuit of that which exceeds the ordinary.

In 1960, whenbicycle was still the primary means of transport in india , Bajaj Auto

Limited was one of the first companies to introduce two wheelers in India;


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Forward to the 1980s and again Bajaj becomes one of the first companies to introduce

motorcycles in India;

Fast forward to 2012 and Bajaj is a two wheelers giant with presence in more than 40

countries and boasting revolutionary technologies like DTSi, exhaustec, SNS with

unmatched industry performance. To know more about the different technologies,

glance through the different sections.

Perfection :

Perfection is how we set new standards. It is a value that exhibits ourdetermination toexcel by endeavoring to establish new benchmarks all thetime.

Speed

Speed is how we convey clear conviction. It is a value that keeps ussharply responsive, mirroring our commitment towards our goals andprocesses.

Transparency

Transparency is how we characterise ourselves. It is a value that makes usworthyof credibility through integrity, of trust through sensitivity and of loyalty through interdependence.

LONG TERM GOALS. MARKET LEADERSHIP :

To provide quality, reliability and good value in the products we sell andservices we offer. To be sensitive and responsive to changing customerneeds right from product development stage to after-sales-service. To aimto become market leaders in whatever we take up for marketingwhether

in restricted areas for certain products or on an All-India basis for others.

PRICE COMPETITIVENESS

To improve our competitiveness by constantly enhancing the performanceof our manufacturing, development, marketing and administrativefunctions. We would like to improve our profits by higher market sharerather than by higher margin.


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SHAREHOLDERS

To assure them proper growth and return for their trust in us by investingtheir money in our company.

CONSUMERS

To ensure that our customers are kept satisfied through good qualityproducts at reasonable price and proper after-sales-services.

PROFIT AWARENESS

To earn reasonable profit is extremely essential for discharging ourobligation to any of the above five groups of people. Awareness to profithas to be strengthened and percolated at all levels, since each person isexpected to and must contribute to increasing the profitability of theCompany.

QUALITY CONSCIOUSNESS

To perpetually strive to improve the quality where there is to be nocompromise. People at all levels-whether they are employees or vendors,or dealersshould be made to consider quality as a way of life. Theemphasis on quality is not to be restricted to our products and our services

only, but to all spheres of our activities.

TECHNICAL SUPERIORITY

To develop our Company in technical orientation so that we sell ourproducts on the basis of technical superiority.

ACTION ORIENTATION

To be on our toes and always dynamic whether markets are good or bad.There should be no place for demoralization and frustration if the marketsare bad or for complacency or lethargy when they are good. We should notThe Project Report On Strategic Leaders Page 13be satisfied with our past achievement but strive for higher and better

performance like a real Karma yogi.


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EXCELLENCE CULTURE

To develop a culture where mediocrity is neither accepted nor tolerated.To create conditions where each person is striving to surpass his earlierbest; where each person is motivated and assisted to give out his best.


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5.STRATEGIC PALNNING :

SWOT Analysis:

Let's analyze the position of Bajaj in the current market set-up, evaluatingits strengths,weaknesses, threats and opportunities available.

Strengths:

Highly experienced management. Product design and development capabilities.

Extensive R & D focus. Widespread distribution network. High performance products across all categories. High export to domestic sales ratio. Great financial support network (For financing the automobile) High economies of scale. High economies of scope.

Weaknesses:

Hasn't employed the excess cash for long. Still has no established brand to match Hero Honda's Splendor in commuter segment. Not a global player in spite of huge volumes. Not a globally recognizable brand (unlike the JV partner Kawasaki)

Threats:

The competition catches-up any new innovation in no time. Threat of cheap imported motorcycles from China

Margins getting squeezed from both the directions (Price as well as Cost) TATA Ace is a serious competition for the three-wheeler cargo segment.


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Opportunities:

Double-digit growth in two-wheeler market. Untapped market above 180 cc in motorcycles. More maturity and movement towards higher-end motorcycles. The growing gearless trendy scooters and scooterette market. Growing world demand for entry-level motorcycles especially in emerging markets.


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PORTERS FIVE FORCES ANALYSIS:

Supplier Bargaining Power:

Suppliers of auto components arefragmented and are extremely critical forthis industry since most of the component work isoutsourced. Propersupply chain management is a costly yet critical need.

Buyer's Bargaining Power:

Buyers in automobile market have more choice to choosefrom and theincreasing competition is driving the bargaining power of customersuphill.With more models to choose from in almost all categories, the market forces haveempowered the buyers to a large extent.


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Industry Rivalry:

The industry rivalry is extremely high with any product being matchedin a

few months by competitor. This instinct of the industry is primarily drivenby the technical capabilities acquired over years of gestation under thetechnical collaboration with international players.

Substitutes:

There is no perfect substitute to this industry. Also, if there is anysubstitute to a two-wheeler, Bajaj has presence in it. Cars, which again area mode of transport, do never directly compete or come in consideration

while selecting two-wheeler ,cyclesdonever even compete with the low entry level moped for even this choicecomes at acomparatively higher economic potential..Managerial Style:Off late Bajaj Auto Limited, Indias premier automotive company, hasemphasiseda lot on organizational restructuring for the Auto business.With thisrestructuring,the existing business roles and responsibilities at the compayhas beenstrengthened and enhanced to ensure greater operational empowerment

and effective management. The five pillars of this new structure (Strategic units)are R&D, Engineering, Two Wheeler Business Unit, and Commercial VehiclesBusiness Unit & International Business Unit. These pillars will be supported byfunctions of Finance, MIS, HR, BusinessDevelopment and Commercial. Pradeep Srivastava, who was VP-Engineering priorto restructuring, will now be President- Engineering. As per the reorganizedstructure the company will have three CEOs. S. Sridhar, currently, VP, Mktg. &Sales Two-Wheelers, will now head the Two Wheeler Business Unit as CEO withmanufacturing operations at Waluj and Akurdi also reporting to him. RCMaheshwari has joined Bajaj Auto as CEO Commercial Vehicles. The company is

in the process of identifying a CEO for its International Business. The three CEOswill be responsible for Top line, Business Growth & profitability of theirrespective businesses. Abraham Josephwill continue to lead Research &Development.

.


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BAJAJ GROUP STRETEGY :

The Bajaj Group is one of best and oldest group of India. The Bajaj grouptry to focus lower class people and produced product.

The technical collaboration agreement with Piaggio of Italy expired in1977. Afterward, Piaggio,maker of the Vespa brand of scooters, filedpatent infringement suits to block Bajaj scooter salesin the United States,United Kingdom, West Germany, and Hong Kong. Bajaj's scooterexports plummeted from Rs 133.2 million in 1980-81 to Rs 52 million($5.4 million) in 1981-82,although total revenues rose five percent to Rs1.16 billion. Pretax profits were cut in half, to Rs63 million. RahulKamalnayan Bajaj, 66, has stepped down as managing director of BajajAuto passing onthe mantle of the company to his eldest son, Rajiv. RahulBajaj will continue as the chairman of the Bajaj conglomerate. Bajaj Auto

is facing increased competition from Honda and Piaggio.Honda hasovertaken Bajaj as India's No.1 scooter maker in the past two years.

New Competition in the 1980s :

Japanese and Italian scooter companies began entering the Indian marketin the early 1980s.Although some boasted superior technology and flashierbrands, Bajaj Auto had built up several advantages in the previousdecades. Its customers liked the durability of the product and the readyavailability of maintenance; the company's distributors permeated thecountry. The Bajaj M-50 debuted in 1981. The new fuel-efficient, 50cc

motorcycle was immediately successful, and the company aimed to be ableto make 60,000 of them a year by 1985. Capacity was the most importantconstraint for the Indian motorcycle industry. Although the country's totalproduction rose from 262,000 vehicles in 1976 to 600,000 in 1982,companies like rival Lohia Machines had difficulty meeting demand. BajajAuto's advance orders for one of its newminimotorcyclesamounted to $57 million. Work on a new plant at Waluj, Aurangabadcommenced in January 1984.The 1986-87 fiscal year saw theintroduction of the Bajaj M-80 and the Kawasaki BajajKB100motorcycles. The company was making 500,000 vehicles a year atthis point. Although Rahul Bajaj credited much of his company's success

with its focus on one type of product, he did attempt to diversify intotractor-trailers. In 1987 his attempt to buy control of Ahsok Leyland failed.So as per this detail the Bajah adopt because it deals with product market.

BUSINESS LEVEL STRETEGYEND OF LICENSE RAJ

The Bajaj Sunny was launched in 1990; the Kawasaki Bajaj 4S Champion


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followed a year later. About this time, the Indian government wasinitiating a program of market liberalization, doing away with the old'license raj' system, which limited the amount of investment any onecompany could make in a particular industry.

It was hoping to increase its exports, which then amounted to just fivepercent of sales. Thecompany began by shipping a few thousand vehicles ayear to neighboring Sri Lanka andBangladesh, but soon was reachingmarkets in Europe, Latin America, Africa, and West Asia. Itsdomesticmarket share, barely less than 50 percent, was slowlyslipping.By 1994, Bajaj also was contemplating high-volume, lowcostcar manufacture. Several of Bajaj's rivals were looking at this marketas well, which was being rapidly liberalized by theIndiangovernment.Bajaj Auto produced one million vehicles in the 1994-95fiscal year.The company was theworld's fourth largest manufacturer of twowheelers,

behind Japan's Honda, Suzuki, andKawasaki.New models included the Bajaj Classic and the Bajaj Super Excel. Bajajalso signed development agreements with two Japanese engineering firms,Kubota and Tokyo R & D. Bajaj'smost popular models cost about Rs20,000. 'You just can't beat a Bajaj,' stated the company's marketingslogan. The Kawasaki Bajaj Boxer and the RE diesel Auto rickshaw wereintroduced in 1997. The next year saw the debut of the Kawasaki BajajCaliber, the Spirit, and the Legend, India's first four-stroke scooter. TheCaliber sold 100,000 units in its first 12 months. Bajaj was planning tobuildits third plant at a cost of Rs 4 billion ($111.6 million) to produce two

new models, one to be developed in collaboration with Cagiva of Italy.

NEW TOOLS IN THE 1990S

Still, intense competition was beginning to hurt sales at home and abroadduring the calendar year 1997. Bajaj's low-tech, low-cost cycles were notfaring as well as its rivals' higher-end offerings, particularly in highpoweredmotorcycles, since poorer consumers were with standing theworst of the recession. The company invested in its new Pune plant inorder to introduce new models more quickly. The company spent Rs 7.5billion ($185 million) on advanced, computer-controlled machine tools. Itwould need new models to comply with the more stringent emissionsstandards slated for 2000. Bajaj began installing Rs 800 catalyticconverters to its two-stroke scooter models beginning in 1999.Although itsdomestic market share continued to slip, falling to 40.5 percent, BajajAuto's profit sincreased slightly at the end of the 1997-98 fiscal year. Infact, Rahul Bajaj was able to boast, 'My competitors are doing well, butmy net profit is still more than the next four biggest companies combined.'Hero Honda was perhaps Bajaj's most serious local threat; in fact, in


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thefall of 1998, Honda Motor of Japan announced that it was withdrawing from this jointventure.

REVAMPING THE DESIGN

Bajaj Auto had quadrupled its product design staff to 500. It also acquiredtechnology fromitsforeign partners, such as Kawasaki (motorcycles), Kubota (diesel engines), and Cagiva(scooters). 'Honda's annual spend on R & D is more than myturnover,' noted Ruhal Bajaj. Hisson, Sangiv Bajaj, wasworking to improve the company's supply chain management. Amarketing executive was lured from TVS Suzuki to help push the newThe Project Report On Strategic Leaders Page 20cycles. Several new designs and a dozen upgrades of existing scooterscame out in 1998 and 1999.These, and a surge in consumer confidence,propelled Bajaj to sales records, and it began to regain market share in thefast-growing motorcycle segment. Sales of three-wheelers fell as somestates, citing traffic and pollution concerns, limited the number of permitsissued for them.

SHARE IN COMPETITOR

In late 1999, Rahul Bajaj made a bid to acquire ten percent of Piaggiofor $65 million. The Italian firm had exited a relationship withentrepreneur Deepak Singhania and was looking toreenter the Indianmarket, possibly through acquisition. Piaggio itself had been mostly

bought out by a German investment bank, Deutsche Morgan Grenfell(DMG), which was looking to sell some shares after turning the companyaround. Bajaj attached several conditions to his purchase of a minorityshare, including a seat on the board and an exclusive Piaggiodistributorship in India. Employment fell from about 23,000 in 1995-96(the year Bajaj suffered a two-month strike at its Waluj factory) to 17,000in 1999-2000. The company planned to lay off another 2,000 workersinthe short term and another 3,000 in the following three to four years.Principal Subsidiaries:

Bajaj Auto Finance Ltd.; Bajaj Auto Holdings Ltd.; Bajaj Electricals Ltd.;Bajaj Hindustan Ltd.; Maharashtra Scooters Ltd.; Mukand Ltd.

Principal Competitors:Honda Motor Co., Ltd.; Suzuki Motor Corporation; Piaggio SpAThe Project Report On Strategic Leaders Page 21Marketing Strategies:

The focus of BAL off late has been on providing the best of the classmodels at competitive prices. Most of the Bajaj models comeloaded withthe latest features within the price bandacceptableby the market. BAL has been the pioneer in stretchingcompetiti


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on into providing latest features in the price segment byup dating the lowprice bikes with the latest features like disk-brakes, anti-skid technologyand dual suspension, etc.BAL adopted different marketing strategies fordifferent models ,few of them are discussed below: -Kawasaki 4S -

First attempt by bajaj to make a mark in the motorcycle segment. Thetarget customer was the father in the family but the target audience ofthe commercial was the son in the family. The time at which Kawasaki4S was launched HeroHonda was the market leader in fuel-efficient bikesand Yamaha in the performance bikes.Boxer -

It took the reins from where the Kawasaki 4S left. Target was the ruralpopulation and the price sensitive customer. Boxermarketed as a valuefor money bike with great mileage.Largerwheelbase, high ground clearance and high mileage were thesellingfactors and it was in direct competition to Hero Honda Dawn and Suzuki

MX100.The Project Report On Strategic Leaders Page 22Caliber

The focus for the Caliber 115 was youth. And though Bajaj made the bikelook bigger and feel more powerful than its predecessor (characteristicsthat will attract the average, 25-plus,executive segment bike buyer), itsapproach towards advertising is even more radically different this timearound. Bajaj gave the man date for the ad campaign to Lowe, pickingthem from the clique of three agencies that do promos for the company(theother two being Leo Burnett and O&M). Going by the initialmarketresponse, the campaign was clearly a hit in the 5-10 years age bracket. So,the teaser campaign and the emphasis on the Caliber 115 being a`Hoodibabaa'bike placed it as a trendy motorcycle for the college-goersand the 25 plus executives do that the same time.Pulsar -

Pulsar was launched in direct competition to theHeroHonda's 'CBZ' model in 150 cc plus segment. The campaignbeared innovative punch line of "Definitely Male" positioningPulsar to be amasculine-looking model with an appeal to the performance sensitivecustomers. The Pulsar went one step ahead of Hero Honda's 'CBZ' andlaunched a twin variant of Pulsar with the 180 cc model. The model was agreat success and has already crossed 1 million mark in sales.The Project Report On Strategic Leaders Page 23Discover -

The same DTSI technology of Pulsar extended to 125cc Discover was agreat success. With this, Bajaj could realize its success riding on the backof technological innovation rather thanthe joint venture way followed by competitors to gain market share.BALnow is taking a leaf out of the FMCG business model to take the companyto greater heights. Bajaj has kicked off a project to completely restructure


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the company's retail network and create multiple sales channels. Over thenext few months, the company will set-up separate for every segment ofits business and consumers.BajajAuto's entire product portfolio, from the entry-level to thepremium, isbeing sold by the same dealers. The restructuring willinvolve separate

dealer networks catering to the urban and ruralmarkets as well as its threewheelerand premium bikessegments. Bajaj Auto also plans to set-up anindependent network of dealers for the rural areas. The needs of financing,selling, distribution and even after-sales service are completely different inthe rural areas and do not makes sense for city dealerstocontrol this. The company also plans to set-up exclusivedealershipsfor its three-wheeler products instead of having them sold through anestimated 300 of its existing dealers.

EXPLATION OF BAJAJ STRETEGY

Before 1980s

( adopt International strategy)

After the completion of Piggio agreement the Bajaj group export itsproduct scooter to another countries like U.S , U.K., Germany The bajajgroup earning at that time is Rs.133.20 million. The bajaj always try tomaintain its product selling and its profitability. The bajaj successful inmanagement decision and easy to increasesales in outside of India.

New Competition in the 1980s( adopt synergistic strategy alliance)

Japanese and Italian scooter companies began entering the Indian marketin the early 1980s. The bajaj already sale its new product 50cc fuelefficient motorcycle. After 1981 Bajaj launch MK100cc bike. Thecompany made 500000 bike in a year. So we can see taht at the changingtime the company change its product , the company adopt changing policyto develop its business. Both company joint hand and launch new productin domestic market or foreign market. In this strategy two company jointhand and produced new product in market and increase the brand name.With the help of this strategy company try to sale maximum product in thedomestic market and create the brand value.

END OF LICENSE RAJ(adopt Business level Cooperative strategies)

The government of india decided outside company easy to collaborate thatbusiness to the Indian company so the bajaj group joint hand to Japanesecompany KAWASAKI to launching new bike in india and outside india.


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The KAWASAKI was famous Japanese company for technology andmanufacturing engine. At this time SUZUKI and HONDA came in Indianmarket. The Kawasaki Bajaj Boxer and the RE diesel Auto rickshaw wereintroduced in 1997. The next year saw the debut of the Kawasaki BajajCaliber, the Spirit, and the Legend, India's first four-stroke scooter. The

Caliber sold 100,000 units in its first 12 months. Bajaj was planning tobuildits third plant at a cost of Rs 4 billion ($111.6 million) to produce twonew models, one to be developed in collaboration with Cagiva of Italy.The company adopt Business level Cooperative strategies. Because atthat time the design made by KAWASAKI. In the business levelcooperative strategy two company shared their resources and reached theproduct. In this strategy the engine and bikes design made by Kawasakiand launches the new product.

EW TOOLS IN THE 1990S( adopt Corporate Relatedness)

'Honda's annual spend on R & D is more than my turnover,' noted RuhalBajaj. His son, Sangiv Bajaj, was working to improve the company'ssupply chain management. A marketing executive was lured fromTVS Suzuki to help push the new cycles. Several new designs and a dozenupgrades of existing scooters came out in 1998 and 1999.These, and asurge in consumer confidence, propelled Bajaj to sales records, and itbegan to regain market share in the fast-growing motorcycle segment.Sales of three-wheelers fell as some states, citing traffic and pollutionconcerns, limited the number of permits issued for them. The Bajaj capturemarket and the brand name is very popular and famous so the companylaunch and new product easy to sale there product in market it is called

The Project Report On Strategic Leaders Page 26corporate relatedness. The benefit is the customers not identify theproduct because the products given parent brand name.

SHARE IN COMPETITOR(adopt Equity Strategic Alliance)

In late 1999, Rahul Bajaj made a bid to acquire ten percent of Piaggiofor $65 million. The benefit of the bajaj company easy to collect workerto its own plant and also in Piaggio Indias worker also work in Bajaj sothe overall production maintain easily. It is called EQUITYSTRATEGIC ALLIANCE. In this strategy one company purchase somepercentages holding in another company and try to produced product andsale in the market.

Other Strategies apply by Bajaj

LOW COST STRATEGYThe Bajaj famous for its scooter and bike in india and outside of india. The


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Bajaj focus rural area and try to manufacturing low cost bike ( BajajPlatina) so they are easy to sale its product in the market. This Strategy iscalled low cost strategies. The details of low cost strategy with exampleare as under.

DIFFERTIATION STRETEGYBajaj try to innovative its product so they are changing bikes engine andmanufacturing fuel efficient bike, more power, more space etc. For e.g.Bajaj Discover is Fuel efficient bike, Bajaj Pulser is more powerful bikeand Bajaj Avenger is famous for space. Bajaj try to provide innovativeproduct to its customers. The products details of Bajaj auto ltd. are asunder.Rajiv's answer on many such days is: "We are No. 1 in technology, inexports, in market cap, in profitability....the only bit that remains is to be aleader in volumes."A few days ago, the 46-year-old CEO told this writer. "We need to take

the longer route to that [to become No. 1 in volumes] because only inmathematics is a straight line the shortest distance between two points. Itell my father it's not as if we have given up on that metric; we're justtaking the more profitable road there."

The Scooter SegmentThe "longer route" Rajiv is talking about involves a re-entry into the entrylevelmarket, which accounts for 65% of the bike market; BAL recentlylaunched the 100 cc Discover T in this segment, and Rajiv is at pains topoint out that it is not a me-too product, but a well-differentiated one withsuperior power, features and styling, and "more expensive than the most

expensive product" in the 100-cc segment.

he second milestone of the "longer route" is unlikely to appear in thesshort to medium term. Rajiv says he "may" return to scooters, but onlyafter BAL reaches a "dominant" global share in bikesfrom 10% todayto 30% or even 40%, a point at which BAL may feel there is littleheadroom left to grow the motorcycles business."One day BAL will have to come back to scooters but I am sure it will bea premium product, and high on fuel efficiency," says RL Ravichandran,executive director, Eicher Motors, a former marketing honcho at the Puneheadquarteredtwo-wheeler maker.

With scooters growing at a healthy clip of 18.4% in fiscal year 2013faster than the 0.77% motorcycles are plodding at and everybody fromHonda to Hero MotoCorp to Mahindra & Mahindra scoring healthy gainsin this segment, there's adequate reason for the chairman (Rahul Bajaj) andboard members to gently nudge Rajiv towards scooters. After all, acombination of a presence in the mass market for bikesat the higherendcoupled with a scooter portfolio will go a long way in closing thegap with leader Hero MotoCorp.


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Says Anil Dua, senior vice-president, sales & marketing, Hero MotoCorp:"If you want to be a significant player in India, you have to be both in 100-cc bikes and scooters. Scooters account for 20% of the two-wheelermarket and 100 cc accounts for 65% of the bikes market."Adds YS Guleria, vice-president, sales & marketing at Honda Motorcycle

& Scooters India (HMSI): "You can take an Indian out of the scootermarket but not a scooter out of an Indian heart. Scooters are now selling inthe commuting segment and in terms of mileage are comparable tomotorcycles."The Project Report On Strategic Leaders Page 31

Strategy or U-turn?

FOCUS STRETEGY

As per the details of differentiation strategy the bajaj auto adopt focusgroup strategy in this strategy the Bajaj group focus the class of people andthen after they launches its product so they are easy to fulfil the demandof customers.

Focus on Gearless Scooters

The market share of gearless scooters is increasing at a healthy rate. Bajajis virtually absent in this range that caters to the needs of women andfamilies. Presently Honda, Hero Honda and TVS are big players in thissegment.

Entry into Four Wheeler SegmentBajaj has entered into a joint venture with Renault-Nissan in thedevelopment of a small car priced at $30004. This is a significant movebecause it directly competes with Tata NANO. Bajaj has also displayed itssmall car prototype in the recently held auto expo. It promises double themileage as compared to any car in the economy segment and is alsoconsidering the option of introducing Diesel and LPG variants. The fourwheeler segment will also be able to hedge any risk that might arisebecause of the two wheeler industry and would profit from retainingconsumers switching from two wheelers.

Scaling Up Service Centers

BAL needs to scale up its service centers both in numbers and in capacity.Keeping in line with its growth target for the next 5 years, its servicecenters should not only cater to two wheelers but should also be upgradedto cater to the needs of four wheelers that Bajaj plans to launch.The Project Report On Strategic Leaders Page 36


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Focus on Easy Credit Lending

In the present economical crisis, Bajaj can utilize its subsidiary, Bajajinsurance in coming up with schemes that will help consumers buy twowheelers on friendly terms.

Investment in Research and Development

We have already identified that the core competency of Bajaj is its R&Dand investment in technology. In order to increase market share andbecome the market leader, Bajaj needs to invest heavily in R&D. Theyhave to introduce efficient and powerful bikes as well as develop alternateenergy vehicles.

Focus on Exports and Global Market

Bajaj Electricals has already setup a manufacturing unit in China. As setup cost and export costs are extremely cheap in China, we recommend the

same strategy for BAL. By doing so, Bajaj can utilize low cost exports.Bajaj is not yet a global name. Considering the fact that it is one of theoldest two wheeler companies and is doing very well in India, it shoulddefinitely target global markets. A movement is seen in this direction sinceit is focusing on the British cult bike company, Triumph as its targettakeover. Triumph, given its niche positioning, cult brand image andstrong product line-up, is an attractive target for the Pune based firm.

Disbanding of Dedicated Sales Force for each Product

Because of the differentiation in the products that Bajaj currentlypossesses and is expected to launch in the near future we recommend Bajajto discontinue its current strategy of dedicated sales force for each productline. This would eventually achieve synergies in selling thereby leading toa reduction in costs

INTERNATIONAL STRETEGY

Bajaj also adopt international strategy because bajaj sale its motorcycleand scooters in outside of india. Bajaj has successful inINTERNATIONAL STRETEGYbecause they have easy to captureIndian market. In international strategy company compulsory successful indomestic market than after he enter the foreign market. With the help ofinternational strategy the bajaj auto sale its product in U.S.,U.K., and othercountries. With the help of international strategy company expand itsbrand name and customer easy to identify the products of bajaj. In Theinternational strategy, the bajaj develop the products demand and firmexports product. Bajaj is present in over 50 countries all over the globe Dominant presence in Africa, Latin America and South Asia withincreasing market share every year


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Market leader in motorcycles in Colombia, Central America, SriLanka, Bangladesh, Philippines, Nigeria, Uganda and Kenya 891,002 units exported in 2009-10, an increase of over 15 % overthe previous year Total motorcycle exports of 726,115 in 2009-10, growth of 15%

over 2008-09 Largest exporter of three wheeled commercial vehicles in the world:164,887 units exported in 2009-10, a rise of 19% over 2008-09The Project Report On Strategic Leaders Page 38Bajaj Auto is one of the oldest and the second largest two wheelemanufacutrer in India. In addition to coping with fierce competition fromother players in the two wheeler segment, it also has to protect its marketshare from the impending onslaught of low price small cars such as TataNano. Holding on to its postion in such a challenging market environmentrequires innovative strategies and deep understanding of consumers needs.The article analyses the two wheeler market in India and Bajaj's

positioning therein. Based on the analysis, the article proposes the strategicoptions available to Bajaj.

Two Wheeler Industry: An Overview

The Indian two-wheeler industry has witnessed spectacular growth in thelast few years. The market dynamics of the industry has substantiallychanged with a majority of the customers preferring bikes to scooters andmopeds. This is primarily due to better fuel efficiencies, dynamics, looksand longer product lives of motorcycles.

The Project Report On Strategic Leaders Page 39The motorcycle segment constitutes about 81.5% of the two wheelermarket in India1. It also contributes to three-fourths of the total exports inthe two wheeler industry. Exhibit 1 shows that Bajaj is the second largestplayer in this segment after Hero Honda.Exhibit 1. Market Shares of the major players in the two wheeler marketsegmentThe industry exhibits some degree of collusive behaviour and thusrepresents an oligopolistic form of market structure. Product and branddifferentiation are seen as the primary means of sustaining competitiveadvantage. In order to sustain brand equity, players spend large

percentages of their revenues in advertising and brand building activities.The supply and distribution networks are decisive factors in stayingcompetitive and normally need a huge capital investment.The two wheeler industry is capital intensive with large fixed costrequirements and new model introductions mandatory at frequent intervalsin order to sustain the demand. This involves substantial design and R&Dcosts. Such high fixed costs can be offset only by achieving economies ofscale. Moreover, developing a distribution channel is extremely difficult in


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a country like India. Therefore, it is difficult for a new player to enter thisindustry.

Demand and Growth Drivers

The following factors play a major role in increasing the demand for twowheelers in India.Personal Income, demography and penetration level are key growth

drivers in the two wheeler industry.

Personal Income

Demand increases as the income increases, only to be substituted later bythe demand for four wheelers. Income has been steadily growing in Indiaand is projected to stabilise at a growth rate of 9-12 percent range by20122.

Demography and Inspiration

The bigger the young and working population, the greater is its need forcommutation. The IT and BPO revolution has influenced this movement.This is a favourable factor since Indias workforce is young.Penetration Level

The lower the penetration levels in the market, the better the scope forfuture demand. As the penetration of the rural market is significantly low,it is going to be a significant long term growth driver.Other Factors

Improvement in infrastructure increases competition, while simultaneouslyimproving the public transport. The average time period taken to replacean existing bike with a newer model has decreased from 7 years to 5 years,resulting in replacement demand growth.Problems in the Two Wheeler Industry - Negative Growth

Negative growth is the major problem being faced by companies in thetwo wheeler industry. The two wheeler industry has been shrinkingcontinuously3. From a peak of over 40% growth in 2002 it is currentlyfacing a growth of -12% in the second quarter of 2008. Exhibit 2 showsthe recent trends.The Project Report On Strategic Leaders Page 41Exhibit 2. De-growth in the industryAnalysis of the different segments leads us to the conclusion that the mainreason for negative growth in the two wheeler market is the fall in demandfor the 100 cc segment which has traditionally enjoyed the maximummarket share as shown in Exhibit3.FY06 9M/07 Q4/07 Q1/08 Q2/08

Motorcycles 19% 18% 4% -10% -12%100cc 7% 14% -12% -20% -23%125cc 121% 31% 71% 10% 11%


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150cc 29% 22% 43% 28% 22%Exhibit 3. Segment-wise analysisMany factors have contributed to this phenomenon. A few of them arediscussed ahead.

I nterest Rates

Interest rates are one of the prime reasons for the sharp fall in demand.Many banks have increased interest rates which make two wheelerscostlier.Credit Crunch

Difficulty in availing loans, rising defaults, tightening of loan recoverylaws and various other factors have dissuaded consumers from availingloans and led to further problems in credit lending.Oil Pri ces

Increasing oil prices have deterred many lower middle class families from

buying two wheelers.Launch of L ow Priced Cars Like Tata NanoIntroduction of low priced cars will directly affect the market. The familysegment would want to gradually move from two wheelers to fourwheelers. The major impact of this phenomenon would be experienced inthe 100-125 cc two wheelers whereas the performance segment i.e. >125cc will continue to grow strongly.Tightening Regulations (Emission Standards)

With the introduction of the Bharat-4 norms, it will be more challenging tomeet these stringent norms whilst simultaneously offering competitiveprices.In spite of these factors, demand drivers are present for the foreseeablefuture and are favourable for the two wheeler industry. However, tocapture this growth, any player will have to correctly position itself toappeal to the consumer.

Positioning of Bajaj Auto in the Two Wheeler Industry

Bajaj Auto is the flagship company of the Bajaj Group of Companies.Bajaj Auto Limited (BAL) is currently India's second largest two wheelerand three wheeler manufacturer. The core competency of Bajaj Auto Ltd isits technology and innovation. Both DTS-i (Digital Twin Spark Ignition)and DTS-Fi (Digital Twin Spark Fuel Ignition) are technologicalbreakthroughs by Bajaj. BAL is also a pioneer in product innovationhaving introduced technologies such as ExhausTEC (Exhaust TorqueExpansion Chamber), LED Tail Lamps, LCD Display, SNS, Spare parts(Tubeless tyres, rear disc brakes), Black colour scheme etc.Thus we observe that BAL which used to be a Defender in 1970-1990through Bajaj Chetak radically moved towards becoming an Analyzer(1990-1997) by focussing on bike segments and has now become aProspector (1997-date) with several patents in its kitty and new bike


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launches every year. Therefore, for a follower to move on and become amarket leader it is essential that it focus on innovation and consumerdemand.

The Way Ahead

Graduating Customers from the 100cc to Higher SegmentsThere are several reasons why Bajaj should concentrate on its coresegment, i.e. greater than 125cc segment. With the introduction of DTS-iand DTS-Fi technology, Bajaj Auto Limited has led the way in pioneeringtechnology along with style.The Profitability Pyramid in Exhibit 4 shows that the margin is very low inthe sub-125cc segment but volumes are high. BAL wants to shift usersfrom 100, 115cc segment to 125cc and higher. Thus Bajaj not only wantsto play on the margins but also wants to increase the market share of 125ccbikes. With its recent launch of XCD 125cc, it has brought in competitionfor its own 100cc model, Platina by delivering a bike that is better in all

respects (including fuel efficiency).The Project Report On Strategic Leaders Page 44Exhibit 4. Profitability PyramidThus, we conclude that Bajaj wants to make a slow departure from 100ccsegment. It has already stopped production of the Discover 125 and willcontinue production of the Platina until the demand for the 100cc remains.It has priced the XCD between the Platina and the Discover and in thefuture, would ideally wish to project the XCD 125 as its base model.

Cash is strength:

Bajaj Auto has been sitting on a cash pile for over five years now. Overthe next couple of years, competition in the two-wheeler market is set tointensify. TVS Motors and HeroHonda are on a product expansion binge.To fight this battle and retain its hard-earned market share in themotorcycle segment, Bajaj Auto will need its cash muscle. A look at itsown story over the past five years provides valuable insight.

Stake for Kawasaki:

Bajaj Auto's attempt to vest the surplus cash in a separate company may bea prelude to offering a stake to Kawasaki of Japan in the equity of theautomobile company. The latter has been playing an increasingly activerole in Bajaj's recent models, and its brand name is also more visible inBajaj bikes than in the past.

Better value proposition:

Shareholder interests may be better served if the cash is retained to pursuegrowth in a tough market. This would also obviate the need to fork-outfancy sums as stampduty to the government for the de-merger. Acombination of alarge one-time dividend and a regular buyback program


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really all our presence," says Sanjiv. But the younger Bajaj scion, whopractises yogic breathing exercises that help him tap his inner energy, hascome a long way in the past five years. His business philosophy offocusing on the long-term but not losing sight of profitability is paying off.Today, Finserv is fast catching up with Rajiv's Bajaj Auto: the firm with a

finger in both insurance and lending has seen a huge turnaround from aloss of Rs 32 crore in 2007/08 to a profit of Rs 1,338 crore in 2011/12. Incomparison, Rajiv's auto business profits have jumped four times from Rs726 crore to Rs 2,990 crore during the same period."We don't want to act like venture capitalists. We'd rather focus on thelong term and build businesses which we think have tremendous value,"says Sanjiv, sitting in his swanky sixth-floor Pune office. "Choosing whento grow, and growth of the right quality are also important parts ofstrategy."Kevin D'Sa, an old loyalist who still splits his working day between theBajaj brothers' businesses, says Sanjiv's empire will have assets of over Rs

100,000 crore in the next 10 years. Bajaj Finance Ltd, the lending arm, hadassets under management of little over Rs 13,000 crore in March 2012,while the group says it has assets of nearly Rs 60,000 crore. "Sanjiv, whois 43 today, is here for the long haul," 58-year-old D'Sa adds.D'Sa began his career with the unified Bajaj Auto when the Bajaj scionswere in their teens. Today, he wears two hats: he is President (Finance) atRajiv's Bajaj Auto, as well as Chief Financial Officer and President(Business Development) at Sanjiv's Bajaj Finserv.The Project Report On Strategic Leaders Page 48"A part of me was also split up. I spend 75 per cent of my time at BajajAuto," he says, sitting at the Bajaj corporate office at Akurdi on theoutskirts of Pune. But he also works closely with Sanjiv in exploring newopportunities. D'Sa says Sanjiv is a manager who delegates, but does notabdicate. "At the operating level, decision-making is quick," he says."Rajiv Bajaj believes, convinces himself and drives a business. Sanjiv goesa little more with consensus." A sports freak whose interests range frombasketball to tennis, Sanjiv thinks out-of-the-box professionally andpersonally. He prefers, for example, to listen to audio books and islistening to The Signal and the Noise by Nate Silver, a book that involves60 hours of listening. "After doing my phone calls and meetings, I take outtime. I finish a book in three to four weeks," says Sanjiv. Despite theturnaround, Sanjiv has a lot of catching up to do with his brother in termsof market capitalisation.Five years ago, both brothers' companies were neck and neck at around Rs8,000 crore. Today, Bajaj Finserv's market cap is Rs 14,947 crore,compared with Bajaj Auto's Rs 60,195 crore.But Sanjiv is not daunted by such comparisons. His mantra is to have adifferentiated strategy and cautiously scale up his businesses. So, while heis in the process of tweaking the wealth management business strategy, themutual fund business is still on the drawing board. The slow-and-steady


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approach is also reflected in Sanjiv's strategy for the insurance business.The Project Report On Strategic Leaders Page 49He took a conscious decision to slow down the business from 2008because, unlike manufacturing, the sector is dependent on the regulatoryenvironment. The gross premium of Bajaj Allianz Life Insurance fell from

Rs 11,420 crore in March 2010 to Rs 7,484 crore in March 2012. "Thebusiness was falling because we were letting it fall," says Sanjiv.Sanjiv makes it a point to spend time interacting with financial regulators.He says the nature of auto manufacturing is different because, onceemissions and sound rules are followed, the product can be manufacturedwithout fear of regulations changing.His strategy has paid off. The 10-year-old Bajaj Allianz Life Insurance isthe second most profitable insurance firm, while ranking fourth in firstyearpremium collections. "We managed to maintain our profitability,"says Sanjiv whose focus in general insurance is more on retail than oncorporate business.

The Project Report On Strategic Leaders Page 50Sanjiv believes there should be no chasing of market share at the cost ofprofits. Rajeev Jain, who heads Bajaj Finance Ltd, a non-banking financecompany (NBFC) focused on consumer lending and commercial loans,says Sanjiv always asks two questions about any fresh business proposal.Can it scale to become a billion-dollar business? And, how will it bedifferent from others in the same field? "Once broad goals are set, he givesthe operating CEO a free hand" says Jain.Despite his generally measured strides, Sanjiv has moved fast at BajajFinance. At a time when other NBFCs shut down or withdrew from theretail business, Bajaj Finance has expanded its product line from two

products five years ago to nearly a dozen in 2012. The company has grownits assets to Rs 13,107crore, profits to Rs 406 crore and top line to Rs2,163 crore as on March 2012.Five years ago, 80 per cent of Bajaj Finance's business focused on autofinancing, but Bajaj Finserv's lending arm is no longer dependent on BajajAuto customers. The business has seen new product lines such as loans tosmall and medium enterprises (SMEs), business loans, constructionequipment financing and infrastructure financing. Today, SMEs have a 28per cent share in the lending portfolio, followed by equipment andinfrastructure financing at 27 per cent. Cross-selling is the centralframework of Sanjiv's financial services business. "The target for crosssellingis to have two products per customer in the consumer business andfive products per customer in the SME business," says Bajaj Finance'sJain.

In wealth management, too, Sanjiv is bringing in the cross-selling model.A year-and-a-half ago, Sanjiv launched the advisory and wealth


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management business targeting the middle class. The strategy is to do itsmall, test the product, learn and then scale up rapidly. "We aretweaking the business model as the cost of acquisition is very high in apush model,"The Project Report On Strategic Leaders Page 51

Sanjiv's biggest bet is to get a banking licence to scale up his lendingbusinesses. "The business is not hampered today because of lack oflicences," he says. "But a banking licence makes a sense in the long term,say 10 years down the line."But he is still not in a hurry to launch new businesses. The mutual fundbusiness, for instance, which got the Securities and Exchange Board ofIndia's clearance a year ago, has yet to start. Insiders say the group isconsidering acquring a mutual fund to build scale.For Sanjiv, funds are not a constraint. Bajaj Holdings & InvestmentLimited - the holding company created following the demerger - has allthe investments and cash balances he would need. It also owns 31 per cent

of Bajaj Auto and 39 per cent of Bajaj Finserv. "The market value of BajajHoldings & Investment is close to Rs 28,000 crore," says D'Sa, who alsomanages the treasury of this third company. In addition, Bajaj Finserv hasreserves and surpluses of its own of over Rs 5,000 crore.If the banking licence comes through in 2013, Sanjiv will be en route tocreating a truly powerful Bajaj brand in the financial services business.And this lanky sports enthusiast knows very well that profits will flow inonce he has the right people and strategy in place.

STRETEGY OF SANJIV BAJAJ

(adopt joint venture strategy)

The Sanjiv Bajaj adopt Related constrainedbecause they are manageBajaj Holding and Investment but Sanjiv owns 31per cent of Bajaj Autoand 39 per cents of Bajaj Finserv. In the Related Constrained less than 70per cents revenue comes from a single business. The market value ofBajaj Holding and Investments is close to 28000 crore. The Sanjiv manageBajaj Holding and Investment, Bajaj finserv, and Bajaj Financial Services.The Project Report On Strategic Leaders Page 52Sanjiv bajaj also adopt JOINT VENTURE STRETEGY and open onelegal independent company that is Bajaj Allianz. The benefit of the jointventure, the Bajaj Allianz earn Rs.1311 Cror in life insurance policy andcapture the Indian insurance market.

Mergers & Acquisitions

Bajaj Finserv, Allianz To Form JV For AMC Biz

Marking its foray into the mutual fund business, Bajaj Finserv, thefinancial services arm ofBajaj Group, today said it has entered into anagreement with Germany-based Allianz Global Investors to set up an


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asset management joint venture firm in the country.Under the agreement, Allianz would hold a 51 per cent stake in the jointventure firm, while the remaining 49 per cent stake would be with theIndian partner, Bajaj Finserv said in a filing to the Bombay StockExchange.

The two groups are already in a joint venture relationship in the insurancesector."Allianz and Bajaj have developed a close relationship over the past eightyears in the process of jointly nurturing life and general insurancebusinesses. I am confident this JV will be as successful as our insurancefirms in India," Bajaj Finserv Chairman Rahul Bajaj said.The agreement to set-up asset management JV is subject to approval fromthe regulatory authorities, the company further said."In spite of the turmoil in the global financial markets, I believe India willcontinue to grow at a healthy pace in the long-term," Allianz GlobalInvestors CEO Joachim Faber said.

Source: http://businesstoday.intoday.in


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Conclusion:

Through this article we have tried to identify various factors that wouldimpact growth of a company in two wheeler industry. We reflected on theimportance of innovation and consumer demand. To graduate from beingfollowers to market leaders, companies need to invest in the righttechnologies and develop the right products at the right time. Bajaj hasshown the willingness to change and thus has been able to achieve strongsales growth. To further consolidate its position and gain market share inthe industry, Bajaj needs to do strategic rethinking and assess its productfocus. The new strategy should also be backed by efficient on the groundcustomer support and continuous research for product innovation.


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