Bajaj Auto Ltd

Situational Analysis:
Indian economy has undergone tremendous changes during the 1980’s and 1990’s. The Indian industrial sector was protected from the international competition by the government of India during the 1980’s. During the 1990’s the economic crisis forced the Indian government to open up the Indian economy. With the opening of the Indian economy the competition for the industrial sector especially the automobile sector was severely hit. Now even the foreign brand automotives could compete in the domestic market without any tariff barriers or any other interventions. This meant that the local industries had to compete with the international brands without any kind of protection. Bajaj Auto Limited (BAL) found that its domestic market declined by 5% in the year 1991-1992. Bajaj had set a goal to protect its dominance in the Indian market and increase its exports to 15% of total sales by 1998.
In the domestic market it was facing a stiff competition from Hero Honda and Kinetic Honda. The main problems of the BAL lied in its improper inventory management, higher average cycle time for launching a new product, not very advanced R&D facilities. To overcome these shortcomings the company did modernize itself but it was important for the company to sustain the tough competition.

Problem Statement:
It was necessary for the company to reinvent itself to sustain competition. The sales have been falling drastically and to make things worse its experience in the exports haven’t also not been very satisfactory. Directly or indirectly it faced many restrictions in many countries especially from the developed countries. The automobiles of the company were also considered as outdated in the developed countries because it lacked the features which the other brands offered. Even in the domestic market the expectations of the customer changed very much. Customer now demanded more mileage and also better banking facility and they expected more stylish vehicles with more features like electric start etc. The company had three options to choose from: 1. Diversify its sectors and focus on new emerging sectors. 2. Company should diversify geographically and develop its export markets. 3. Company should focus on protecting company’s current share of automobile market.

Analysis:
Before the opening up of the economy the company was able to penetrate into the Indian market. But after the opening of the economy the company spent hugely in modernizing itself. It improved its R&D capabilities. It modernized its dealership and distribution network to reduce the waiting period to deliver to the customer. It has introduced the online link to accept the orders online from the dealers. The inventory was now more systematically managed. The reserves were maintained and the number of servicing centers was increased exponentially all over the country to offer better service to the customer. The easy finance options were provided by the organization to attract more number of customers. Significant percent of sales were introduced in the advertisements to project itself as the most loyal vehicle to the Indian. The ad’s tried more to educate the customers the advantages of buying a Bajaj vehicle. To emphasize on its superior quality “Kawasaki” was more emphasized on the name. The company tried to penetrate into the rural markets by designing the vehicles which were more suitable for the rural roads. Even in the international market BAL had to face many turbulent situations. It went into an agreement with Indonesia but due to the devaluation of the Indonesian currency and combined with the local manufacturer content it couldn’t continue to produce after 1982. Bangladesh and Sri Lanka contributed to the major exports of the BAL. The significant and a promising contribution was coming from the Latin America. The countries like Peru, Venezuela, Argentina, Mexico, Chile, Paraguay and Colombia showed a promising future for the exports of BAL. There was no competition to BAL in 2 and 3 wheelers and they had significant price advantage over the Japanese automobiles. The African countries possessed a huge potential but due to the lesser purchasing power and very less availability to foreign exchange.

SWOT analysis: Strengths * Price competitive compared to other brands * Strong dealer, distribution and service network * Improved inventory maintenance * Strong brand image * Easier finance | Opportunities * Ease of trade in Latin America and neighboring countries. * Demand for two and three wheelers increasing in rural India * Demand in developed countries with new features added | Weaknesses * Lack of good R&D facilities * High average cycle to bring the new concepts to reality in design * Lack of new features as per the needs of the customers across various countries. | Threats * Heavy competition * Changing consumers demands and consumption pattern * Advanced features in the automobiles of the other brands | Recommendations: Out of all the three options stated in the problem statement the following recommendations have to be followed to meet the target of dominant share in the domestic market and increase the exports to 15% of total sales. 1. The company should conduct a wide research in understanding the markets to know which segment to target. No research has been conducted to understand the consumption pattern of the market based on the demographic parameters like age groups and their preferences and expectations from the automobile. 2. The company should invest heavily in R&D to reduce the time lag to convert a concept into reality so that the product can be launched very easily. 3. The company also has to invest in R&D to increase the performance of the vehicle like more stylish looks, better performance and most importantly lesser emissions so that they do not face any ban from local government due to high emissions. 4. The company should focus on developing distribution and network all over the country in the target countries so that the better service is provided to the customers. 5. The company should come up with easier credit facilities in developing countries especially in African countries so that this market can be easily tapped when give liberal credit facilities. 6. The company can diversify into new sectors but should focus only on those sectors which can assist the automobile sector to grow further. Ex the establishment of Bajaj Finance has helped in the high growth of the sales for the two and three wheeler vehicles.