Rahul Bajaj became the group's chief executive officer in1968 after first picking up an MBA at Harvard. He lived nextto the factory in Pune, an industrial city three hours' drivefrom Bombay. The company had an annual turnover of Rs 72million at the time. By 1970, the company had produced100,000 vehicles. The oil crisis soon drove cars off the roadsin favor of two-wheelers, much cheaper to buy and manytimes more fuel-efficient.
A number of new models were introduced in the 1970s, including the three-wheeler goodscarrier and Bajaj Chetak early in the decade and the Bajaj Super and three-wheeled, rear engineAutorickshaw in 1976 and 1977. Bajaj Auto produced 100,000 vehicles in the 1976-77 fiscalyear alone.The technical collaboration agreement with Piaggio of Italy expired in 1977. Afterward, Piaggio,maker of the Vespa brand of scooters, filed patent infringement suits to block Bajaj scooter salesin the United States, United Kingdom, West Germany, and Hong Kong. Bajaj's scooter exportsplummeted 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 Rs 1.16 billion. Pretax profits were cut in half, to Rs63 million.
New Competition in the 1980s
Japanese and Italian scooter companies began entering the Indian market in the early 1980s.Although some boasted superior technology and flashier brands, Bajaj Auto had built up severaladvantages in the previous decades. Its customers liked the durability of the product and theready availability of maintenance; the company's distributors permeated the country.The Bajaj M-50 debuted in 1981. The new fuel-efficient, 50cc motorcycle was immediatelysuccessful, and the company aimed to be able to make 60,000 of them a year by 1985. Capacitywas the most important constraint for the Indian motorcycle industry. Although the country'stotal production rose from 262,000 vehicles in 1976 to 600,000 in 1982, companies like rivalLohia Machines had difficulty meeting demand. Bajaj Auto's advance orders for one of its newmini-motorcycles amounted to $57 million. Work on a new plant at Waluj, Aurangabadcommenced in January 1984.The 1986-87 fiscal year saw the introduction of the Bajaj M-80 and the Kawasaki Bajaj KB100motorcycles. The company was making 500,000 vehicles a year at this point.The Bajaj Sunny was launched in 1990; the Kawasaki Bajaj 4S Champion followed a year later.About this time, the Indian government was initiating a program of market liberalization, doingaway with the old 'license raj' system, which limited the amount of investment any one companycould make in a particular industry.
|Case Code||:||BSTR344||For delivery in electronic format: Rs. 300;|
For delivery through courier (within India): Rs. 300 + Rs. 25 for Shipping & Handling Charges
ThemesFailure of Strategy / Revival Strategy / Competitive Strategy
|Case Length||:||16 Pages|
|Teaching Note||:||Not Available|
|Organization||:||Bajaj Auto Limited|
The case discusses the business strategy of Bajaj Auto Limited (Bajaj Auto), a leading Indian manufacturer of two wheelers. Bajaj Auto, which sold two wheelers in India since 1945, was the market leader in the Indian two wheeler industry till late 1990s. However, the company failed to visualize the structural changes happening in the Indian two wheeler industry since the early 1990s. After the Indian economy was liberalized in 1991, foreign players entered the Indian two wheeler industry with their innovative products and sophisticated technology. In spite of rising competition, Bajaj Auto neither upgraded its scooter models, nor focused on the rapidly growing motorcycle segment.
In late 2001, Bajaj Auto initiated a transformation process in an effort to transform its image from being a scooter manufacturer to a motorcycle company. At the same time, the company continued its efforts to revive the geared scooter market. The company continued to invest time and resources in the geared scooter segment even till the early 2000s when the sales of geared scooters were negligible as compared to the gearless scooters. Bajaj Auto also failed to introduce innovative products in the rapidly growing gearless scooter market. The company lost its leadership status in the scooters segment to Honda Motorcycles and Scooter India (HMSI). The case examines how Bajaj Auto became a follower both in the scooter and motorcycle segment from being the market leader in the Indian two wheeler industry.
» Understand the structural changes happening in the Indian two wheeler industry in the 1990s and early 2000s and its implications.
» Examine the growth strategy of Bajaj Auto over the decades.
» Study the transformation process initiated by Bajaj Auto and its impact.
» Analyze the shortcomings in the business strategy of Bajaj Auto.
Bajaj Auto Limited, Indian Two wheeler industry, Market leader, Market Follower, Competitive Strategies, Liberalization of Indian economy, Hero Honda Motors Limited, Indian Motorcycles Industry, Geared scooters Segment, Gearless scooter Segment, Honda Motorcycle and Scooters India, Indian Rural Two Wheeler Market, Collaboration, Joint Ventures, Bajaj Chetak, Bajaj Super, Bajaj Caliber, Pulsar, TVS Motor Company, 100 CC motor cycles, Entry segment, Executive segment, Premium segment, Structural Changes in the Industry, Consumer Behavior, Demographics
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