DAVID VS GOLIATH - Situation
Synopsis
When India opened its automotive sector in the mid-1980s, the country’s largest maker of motor scooters, Bajaj Auto, confronted a predicament similar to what many “emerging-market” companies face. Honda, which sold its scooters, motorcycles, and cars worldwide on the strength of its superior technology, quality, and brand appeal, was planning to enter the Indian market. Its remarkable success selling motorcycles in Western markets and in such nearby countries as Thailand and Malaysia was well known. For the independent-minded Bajaj family, a joint venture with Honda was not an option. But faced with Honda’s superior resources, what else could the company do?
Here in this situation David is BAJAJ Auto and Goliath would be HONDA Motors.
Why David succeeded?
A closer look at the situation convinced Bajaj’s managers that Honda’s advantages were not as formidable as they first appeared. The scooter industry was based on mature and relatively stable technology. While Honda would enjoy some advantages in product development, Bajaj would not have to spend heavily to keep up. The makeup of the Indian scooter market, moreover, differed in many ways from Honda’s established customer base. Consumers looked for low-cost, durable machines, and they wanted easy access to maintenance facilities in the countryside. Bajaj, which sold cheap, rugged scooters through an extensive distribution system and a ubiquitous service network of roadside-mechanic stalls, fit the Indian market well. Honda, which offered sleekly designed models sold mostly through outlets in major cities, did not.
Instead of forming a partnership with Honda, Bajaj’s owners decided to stay independent and fortify their existing competitive assets. The company beefed up its distribution and invested more in research and development. Its strategy has paid off well. Honda, allied with another local producer, did quickly grab 11% of the Indian scooter market, but its share stabilized at just under that level. Bajaj’s share, meanwhile, slipped only a few points from its earlier mark of 77%. And in the fall of 1998, Honda announced it was pulling out of its scooter-manufacturing equity joint venture in India.
Bajaj’s story points to the two key questions that every manager in emerging markets needs to address:

First, how strong are the pressures to globalize in your industry?
Second, how internationally transferable are your company’s competitive assets?
By understanding the basis for competitive advantage in your industry, you can better appreciate the actual strengths of your multinational rivals.
Bajaj like most emerging-market companies have assets that give them a competitive advantage mainly in their home market. For example, may have a local distribution network that would take years for a multinational to replicate. They may have longstanding relationships with government officials that are simply unavailable to foreign companies. Or they may have distinctive products that appeal to local tastes, which global companies may be unable to produce cost effectively. Any such asset could form the basis for a successful defense of the home market.
Two parameters—the strength of globalization pressures in an industry and the degree to which a company’s assets are transferable internationally—can guide strategic thinking. If globalization pressures are weak, and a company’s own assets are not transferable, then, like Bajaj, the company needs to concentrate on defending its turf against multinational incursion. We call a company employing such a strategy a defender.

For defenders like Bajaj, the key to success is to concentrate on the advantages they enjoy in their home market. In the face of aggressive and well-endowed foreign competitors, they frequently need to fine-tune their products and services to the particular and often unique needs of their customers. Defenders need to resist the temptation to try to reach all customers or to imitate the multinationals. They’ll do better by focusing on consumers who appreciate the local touch and ignoring those who favor global brands.
RESULT
By 1980 Bajaj Auto was top scooter producer by far, and its Chetak brand had a 10-year waiting list.
The quasi-monopoly status BAJAJ got as an early entrant at a time when foreign collaborations and licenses were difficult to obtain. However, in the 1980s capacity licensing and foreign collaboration for two-wheelers was liberalized. All the world's top players (Honda, Suzuki, Yamaha, Piaggio, Garelli, Peugot) entered through collaborations or joint ventures.
Hero Honda went ahead in motor-cycles, but scooters were far more popular in the 1980s. Then came economic liberalization in the 1990s. Traditional constraints ended. But Indians began to prefer motor-cycles to scooters, and Bajaj Auto could not touch Hero Honda in this field.
Moreover, liberalisation brought the threat of cheap imports and FDI from top companies like Honda a top-class plant that could compete on even terms, but not with foreigners enjoying better infrastructure, cheaper finance, and flexible labour laws. ajiv Bajaj created a workforce with 80 per cent diploma engineers and 20 per cent skilled workers. Wages averaged just Rs 12,000 per month for engineers at Chakan against Rs 11,500 for workers at Akurdi.
MORALE
The narrative is that through being fleeter of foot, more innovative and creative, possibly by being an out-and-out maverick, a small business can take share from a larger one. But the key is to have a blindingly clear proposition that the consumer can grasp immediately and a larger competitor that you are clearly not. They are slow, uncaring, inflexible and corporate; while you are the people’s champion, offering something innovative, provocative, compelling, helpful and fun.

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[ 1 ]. https://hbr.org/1999/03/competing-with-giants-survival-strategies-for-local-companies-in-emerging-markets
[ 2 ]. http://www.economistgroup.com/leanback/consumers/david-vs-goliath-how-challenger-brands-spur-disruption/