Bajaj Auto Index 0 Objective (pg no1) 1 Introduction (pg no 1) 2 History (pg no 2) 3 Entry Barriers(pg no 2) 4 SWOT Analysis (pg no 3) 5 Porter’s Analysis (pg no 4) 6 Managerial Style(pg no5) 7 Hierarchy( pg no 6) 8 HR Practices(pg no 7 ) 9 Business Stratergies(pg no 8) 9a, Marketing Strategies (pg no 8) 9b, Other Strategic Issues (pg no 10) 10 Cost effective and Environmental strategies (pg no 12) 10a, Conservation of energy (pg no 12) 11 Community leadership programmes (pg no 13) 12 New projects (pgno15) 13 Profits during recession (pg no 17) 14. Performance of the company (pg no 17) 4a, Total Sales (pg no 17) 14b, Financials (pg no 18) 14c, Motorcycle sales, domestic and exports (in numbers) (pg no 18) 14d, Bajaj Auto’s exports (in numbers) (pg no 18) 14e, Three-wheeler sales (in numbers) (pg no 19) 14f, Goods carriers (pg no 19) 14g, Three-wheelers (pg no 19) 14f, International Business snapshot (pg no 20) 15 Industrial relations ( pg no 20) 16 Subsidiaries (pg no 21) 17 Spare parts Division (pg no22) 18 Corporate social responsibility activities (pg no 23) 19 Awards Won by Bajaj Auto Ltd. (pg no 25) 20 Research and development (pg no 26) 21 The Future (pg no 27) 2 Recommendations (pg no 29) 23 Learning Acquired (pg no 30) 23 References (pg no 30) Pg#1 0. Objective: To get the information about the genesis, growth and the performance of the company in the recent past. To study the strategies, policies, hierarchy, managerial style etc. the company adopted which led to it’s success. 1. Introduction: Bajaj Auto is a major India Automobile manufacturer. It is India’s largest and the world’s 4th largest two- and three-wheeler maker. It is based in Pune, Maharashtra, with plants in Akurdi and Chakan (near Pune),Waluj and Patnagar in Uttaranchal.
Bajaj Auto makes and exports motor scooters, motorcycles and the auto rickshaw. Over the last decade, the company has successfully changed its image from a scooter manufacturer to a two wheeler manufacturer. Its product range encompasses scooters and Motorcycles. It’s real growth in numbers has come in the last four years after successful introduction of a few models in the motorcycle segment. The company is headed by Rahul Bajaj who is worth more than US$1. 5 billion. Bajaj Auto came into existence on November 29, 1945 as M/s Bachraj Trading Corporation Private Limited.
It started off by selling imported two- and three-wheelers in India. In 1959, it obtained license from the Government of India to manufacture two- and three-wheelers and it went public in 1960. In 1970, it rolled out its 100,000th vehicle. In 1977, it managed to produce and sell 100,000 vehicles in a single financial year. In 1985, it started producing at Waluj in Aurangabad. In 1986, it managed to produce and sell 500,000 vehicles in a single financial year. In 1995, it rolled out its ten millionth vehicle and produced and sold 1 million vehicles in a year. Pg#2 2. History:
Founded in 1926, at the height of India’s movement for independence from the British, the group has an illustrious history. The integrity, dedication, resourcefulness and determination to succeed which are characteristic of the group today, are often traced back to its birth during those days of relentless devotion to a common cause. Jamnalal Bajaj, founder of the group, was a close confidant and disciple of Mahatma Gandhi. In fact, Gandhiji had adopted him as his son. This close relationship and his deep involvement in the independence movement did not leave Jamnalal Bajaj with much time to spend on his newly launched business venture.
His son, Kamalnayan Bajaj, then 27, took over the reins of business in 1942. He too was close to Gandhiji and it was only after Independence in 1947, that he was able to give his full attention to the business. Kamalnayan Bajaj not only consolidated the group, but also diversified into various manufacturing activities. The present Chairman of the group, Rahul Bajaj, took charge of the business in 1965. Under his leadership, the turnover of the Bajaj Auto the flagship company has gone up from Rs. 72 million to Rs. 46. 16 billion (USD 936 million),its product portfolio has expanded from one to and the brand has found a global market.
He is one of India’s most distinguished business leaders and internationally respected for his business acumen and entrepreneurial spirit. 3. Entry Barriers: ? Entry barriers are high. Pg # 3 ? The market runs on high economies of scale and on high economies of scope. ? The need for technical expertise is high. ? Owning a strong distribution network is important and is very costly. ? All these make the barrier high enough to be a deterrent for new entrants. 4. SWOT Analysis: Let’s analyze the position of Bajaj in the current market set-up, evaluating its 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) Pg #4
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. 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. 5. Porter’s Five Forces Analysis: Supplier Bargaining Power: Suppliers of auto components are fragmented and are extremely critical for this industry since most of the component work is outsourced. Proper supply chain management is a costly yet critical need. ? Buyer’s Bargaining Power: Buyers in automobile market have more choice to choose from and the increasing competition is driving the bargaining power of customers uphill. With more models to choose from in almost all categories, the market forces have empowered the buyers to a large extent. ? Industry Rivalry: The industry rivalry is extremely high with any product being matched in a few months by competitor.
This instinct of the industry is primarily driven by the technical capabilities acquired over years of gestation under the technical collaboration with international players. Pg#5 ? Substitutes: There is no perfect substitute to this industry. Also, if there is any substitute to a two-wheeler, Bajaj has presence in it. Cars, which again are a mode of transport, do never directly compete or come in consideration while selecting a two-wheeler, cycles do never even compete with the low entry level moped for even this choice comes at a comparatively higher economic potential. 6. Managerial Style:
Off late Bajaj Auto Limited, India’s premier automotive company, has emphasised a lot on organizational restructuring for the Auto business. With this restructuring, the existing business roles and responsibilities at the company has been strengthened and enhanced to ensure greater operational empowerment and effective management. The five pillars of this new structure (Strategic units) are R, Engineering, Two Wheeler Business Unit, and Commercial Vehicles Business Unit & International Business Unit. These pillars will be supported by functions of Finance, MIS, HR, Business Development and Commercial.
Pradeep Srivastava, who was VP-Engineering prior to restructuring, will now be President- Engineering. As per the reorganized structure the company will have three CEO’s. S. Sridhar, currently, VP, Mktg. & Sales Two-Wheelers, will now head the Two Wheeler Business Unit as CEO with manufacturing operations at Waluj and Akurdi also reporting to him. RC Maheshwari has joined Bajaj Auto as CEO Commercial Vehicles. The company is in the process of identifying a CEO for its International Business. The three CEO’s will be responsible for Top line, Business Growth & profitability of their respective businesses.
Abraham Joseph will continue to lead Research & Development. Pg #6 Mr. Rajiv Bajaj, Managing Director, Bajaj Auto Ltd. Said, “The new structure would assist in “Aligning the Vectors” of the organization and will enable the company to live its Brand Values & be “Distinctly Ahead”. The objective of this is to transit from relatively narrow functional definitions into more integrated and cross-functional working with clear focus on business results (Ahead) as well as focus on our Brand Values of speed, Innovation, and Perfection (Distinctly). 7. Hierarchy: Rahul Bajaj Madhur Bajaj Rajiv Bajaj Sanjiv Bajaj Eric Vas Abraham Joseph Pradeep Shrivastava S Sridhar R C Maheshwari Rakesh Sharma C P Tripathi N H Hingorani Kevin P D’sa V S Raghavan S Ravikumar K Srinivas Ranjit Gupta J. Sridhar Chairman Vice Chairman Managing Director Executive Director President (New Projects) President (Research & Development) President (Engineering) CEO (2WH) CEO (Commercial Vehicles) CEO (International Business) Vice President (Corporate) Vice President (Commercial) Vice
President (Finance) CEO (Operations, BHIL) Vice President (Business Development) Vice President (Human Resources) President (Insurance, BFSL) Company Secretary Pg#7 8. HR Practices: ? The Company affirms that its competitiveness is interlinked with the well being of all sections of the Indian society. ? The Company believes that equal opportunity in employment for all sections of the society is a component of its growth and competitiveness. It further believes that inclusive growth is a component of growth and development of the country. The Company affirms the recognition that diversity to reflect socially disadvantages sections of the society in the workplace has a positive impact on business. ? The Company will not practice nor support conscious discrimination in any form. ? The Company does not bias employment away from applicants belonging to disadvantaged sections of society if such applicants possess competitive skills and job credentials. ? The Company’s selection of business partners is not based on any considerations other than normal business parameters.
In case of equal business offers, the Company will select a business partner belonging to a socially disadvantaged section of society. ? This Code of Conduct for Affirmative Action will be put up on the company web-site to encourage applications from socially disadvantaged sections of society. ? The Company makes all efforts for up skilling and continual training of all its employees in order to enhance their capabilities and competitive skills. No discrimination of any type will be shown in this process. The Company may have a partnership programme with educational institution/s to support and aid students from socially disadvantaged Pg#8 sections of society. ? The Company will maintain records of Affirmative Action. ? The Company has nominated Mr K Srinivas, Vice President (HR), to oversee and promote the Affirmative Action policies and programmes. He will be accountable to the Chairman. ? The Company will make available its learning and experiences as a good corporate citizen in Affirmative Action to other companies desiring to incorporate such policies in their own business. 9. Business Stratergies: 9A, Marketing Strategies:
The focus of BAL off late has been on providing the best of the class models at competitive prices. Most of the Bajaj models come loaded with the latest features within the price band acceptable by the market. BAL has been the pioneer in stretching competition into providing latest features in the price segment by updating the low price bikes with the latest features like disk-brakes, anti-skid technology and dual suspension, etc. BAL adopted different marketing strategies for different models, few of them are discussed below: – Kawasaki 4S – First attempt by bajaj to make a mark in the motorcycle segment.
The target customer was the father in the family but the target audience of the commercial was the son in the family. The time at which Kawasaki 4S was launched Hero Honda was the market leader in fuel-efficient bikes and Yamaha in the performance bikes. Boxer – It took the reins from where the Kawasaki 4S left. Target was the rural population and the price sensitive customer. Boxer marketed as a value for money bike with great mileage. Larger wheelbase, high ground clearance and high mileage were the selling factors and it was in direct competition to Hero Honda Dawn and Suzuki MX100.
Pg#9 Caliber – The focus for the Caliber 115 was youth. And though Bajaj made the bike look bigger and feel more powerful than its predecessor (characteristics that will attract the average, 25-plus, executive segment bike buyer), its approach towards advertising is even more radically different this time around. Bajaj gave the mandate for the ad campaign to Lowe, picking them from the clique of three agencies that do promos for the company (the other two being Leo Burnett and O). Going by the initial market response, 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-goers and the 25 plus executives both at the same time. Pulsar – Pulsar was launched in direct competition to the Hero Honda’s ‘CBZ’ model in 150 cc plus segment. The campaign beared innovative punch line of “Definitely Male” positioning Pulsar to be a masculine-looking model with an appeal to the performance sensitive customers. The Pulsar went one step ahead of Hero Honda’s ‘CBZ’ and launched a twin variant of Pulsar with the 180 cc model.
The model was a great success and has already crossed 1 million mark in sales. Discover – The same DTSI technology of Pulsar extended to 125 cc Discover was a great success. With this, Bajaj could realize its success riding on the back of technological innovation rather than the joint venture way followed by competitors to gain market share. BAL now is taking a leaf out of the FMCG business model to take the company to greater heights. Bajaj has kicked off a project to completely restructure the company’s retail network and create multiple sales channels.
Over the next few months, the company will set-up separate sales channels for every segment of its business and consumers. Bajaj Auto’s entire product portfolio, from the entry-level to the premium, is being sold by the same dealers. The restructuring will involve separate dealer networks catering to the urban and rural markets as well as its three-wheeler and premium bikes segments. Bajaj Auto also plans to set-up an independent network of dealers for the rural areas. The needs of financing, selling, distribution and even after-sales service are completely different in the rural areas and do not makes sense for city dealers to control this.
The company also plans to set-up exclusive dealerships Pg#10 for its three-wheeler products instead of having them sold through an estimated 300 of its existing dealers. 9b,Other Strategic Issues: Cash is strength: Bajaj Auto has been sitting on a cash pile for over five years now. Over the next couple of years, competition in the two-wheeler market is set to intensify. TVS Motors and Hero Honda are on a product expansion binge. To fight this battle and retain its hard-earned market share in the motorcycle segment, Bajaj Auto will need its cash muscle.
A look at its own story over the past five years provides valuable insight. Delisting worry: What is worrying is that there is an idea to delist the investment company (also an indirect indication that it would be listed initially). This would be closing the valve of equitable ownership distribution. There is a hint of a buyback of shares of the investment company as this is the only way it can be delisted. The company would not be short of cash to put through such a buyback. Factors such as low valuation, low trading interest and the need to provide shareholders may be cited as lausible reasons for the buyback. Stake for Kawasaki: Bajaj Auto’s attempt to vest the surplus cash in a separate company may be a prelude to offering a stake to Kawasaki of Japan in the equity of the automobile company. The latter has been playing an increasingly active role in Bajaj’s recent models, and its brand name is also more visible in Bajaj bikes than in the past. Better value proposition: Shareholder interests may be better served if the cash is retained to pursue growth in a tough market.
This would also obviate the need to fork-out fancy sums as stamp duty to the government for the de-merger. A combination of a large one-time dividend and a regular buyback program through the tender route may offer better value. A strategic stake for Kawasaki would only positively influence the stock’s valuation. Strategies for the Overseas Markets:Bajaj Auto looks at external markets primarily with three strategies: – 1) A market where all BAL need to do is distribute through CKD or CBU routes. Pg#11 2) Markets where BAL need to create new products. ) Markets where BAL need to enter with existing products and probably with a good distributor or a production facility or a joint venture. Earlier, most of the products that Bajaj exported were scooters and some motorcycles. However, in its target markets, like in India, the shift was towards motorcycles. With the expansion in Bajaj’s own range to almost five-six platforms of motorcycles, it had a better offering to export, also the reason for its stronger showing. For the last fiscal, 60 per cent of its exports were two-wheelers and the rest three-wheelers.
Of the two-wheeler exports, close to 90 per cent were motorcycles. Bajaj has identified certain key markets, which hold potential. Its first overseas office established at the Jebel Ali free trade zone has been the focal point for exports to middle Africa and the Saharan nations. Egypt and Iran also continue to be strong markets for Bajaj. The other market, which would be a focus area, is South America, where the company feels it is fairly well represented in most countries, except in Brazil, the largest market.
The company recently participated in a large auto exhibition in Brazil and found good consumer acceptance to products like Pulsar and Wind 125. The other focus area is the ASEAN nations, which constitute the third biggest consumer of two-wheelers. The biggest among them is Indonesia, where Bajaj distributors are looking to introduce eco-friendly four-stroke auto rickshaws. But two-wheeler market requires great deal of effort from BAL. Everybody is there with Honda leading the show. There’s Suzuki, Kawasaki and some Korean and Chinese models.
BAL should look at the right product mix for two-wheelers. Bajaj’s Pulsar model has taken off well there. It also wants to develop a new step-through model for the Indonesian market, but for now it will create a base there with its motorcycle models. Bajaj has also made a beginning by selling bikes in the Philippines branded in the name of its technical partner, Kawasaki. The two signed an MoU in February. Kawasaki, a large multi-product conglomerate, only makes high-end bikes and does not have sub-200cc models.
Kawasaki is marketing the new model, Wind 125, developed by both companies, in the Philippines. The Bajaj-developed models, Caliber and Byke, which is a fuel-efficient bike, are also being Pg#12 distributed by Kawasaki. This is a good beginning strategically for Kawasaki to evince interest in Bajaj products for markets which can still buy less than 150 cc. 10. Cost effective and Environmental strategies: 10a,Conservation of energy: As a part of continuing efforts to conserve various resources, following steps were taken to conserve energy
Electrical energy saving was achieved by installation of localised portable air compressors at various shops during low production periods, energy efficient screw compressors by replacing CPT compressors, real timer electrical circuits installed to switch off electrical equipments during lunch / tea breaks and during non utilisation of production equipments, fan less cooling towers for AC plants, high efficiency reflector fittings with electronic ballasts tube lights, use of LED & CFT street lights, replacement of 350 W air circulators by 180 W air circulators, 150 W MH lamps instead of 250 W HPSV lamps at shop floors, Variable Frequency Drives (VFD) for ASUs in paint shops, washing machine blowers, compressors etc and rationalisation of pumping hours of main pump as well as booster pump of pump house. Water saving was achieved by replacement of old under-ground water pipes with boveground pipes to avoid water wastage through leakage, drip irrigation system for gardening, installation of localised fresh water storage systems, usage of treated water for bin washing and paint shop process, rain water harvesting and use of bio-chemical additives to reduce frequency of water change in various paint processes; and LPG saving was achieved by installation of waste heat recovery system for hot water generation used in pre-treatment process of paint shop, use of reflective coating inside furnaces for better heat retention, three-wheeler electro-deposition (ED) painting process changed from Acrylic ED to Cathodic ED, optimisation of loading pattern in CGC and seal quench Pg#13 urnaces, reduction of hot water temperature for pre-treatment, use of bio- gas for cooking in canteens, start-up losses in ovens and hot water generation plants and changed design of paint jigs to reduce jig stripping frequency. Impact of measures taken: As a result of the initiatives taken for conservation of energy and natural resources, the company has effected an overall reduction in consumption as under:- Reduction achieved in: 2008-09 2007-08 % % Electrical energy 23 23 Water 11 16 LPG 44 12 Investment / savings: Investment for energy conservation activities: Rs. 9. 35 million Saving achieved through above activities: Rs. 24. 2 million 11. Community leadership programmes:
During the year, the employees volunteered for blood donation camp at Deenanath Mangeshkar Hospital, Pune and Dr Susheela Tiwari Hospital, Pantnagar Fire fighting teams of the company along with vehicles responded to 20 Fire assistance calls from Government Fire Department / other industrial units outside the factory premises in the larger interests of saving invaluable life and property. Pg#14 Community Care: In line with the commitment to enrich the life of all with whom bajaj deals, it showes sensitivity to the employees, who opted for voluntary retirement at the Akurdi Plant. Soon after the Akurdi employees expressed their interest in accepting the Voluntary Retirement Scheme, the company organised a series of interactive meetings with leading financial institutions. The officers explained the need to prudently and safely invest the monies received, considering the various options available today.
The company devised attractive schemes for interested employees so that they could receive regular monthly payments, in addition to lump sum compensation announced. They were also provided with options of taking loans at competitive rates of interest. By these actions, it is the company’s endeavour that the employees, who have accepted voluntary retirement scheme, are independently self-sustaining and can take good care of their families. Employees were also guided for alternative possibilities, whether as employee or entrepreneur. Health: Government of India- Ministry of Health and Family Welfare – National Aids Control Organisation (NACO) and CII have initiated Public Private Partnership (PPP) in order to provide better healthcare to AIDs patients.
Your company has signed a tripartite MoU with NACO and Yeshwantrao Chavan Municipal Hospital (YCMH) in Pimpri to set up an Anti Retroviral Treatment Centre (ART Centre) at YCMH in Pimpri, Pune with the cooperation of Pimpri Chinchwad Municipal Corporation for HIV patients. Many dignitaries from Global Fund, WHO and such other organisations have visited the ART centre, which is the largest unit run by an industry under Public Private Partnership programme. Apart from two doctors and six supporting medical staff, the ART centre has added audio-visual facilities for group counseling, as a result of which the ART centre registration has reached 1,900 numbers and the unit is recognised today as one of the best Pg#15 ART centres in the country.
Rural and community development activities and empowerment of women. The company continued with its rural development activities in Pune and Aurangabad districts of Maharashtra through its trust, Jankidevi Bajaj Gram Vikas Sanstha (JBGVS). JBGVS aims at an integrated development of 43 selected villages, to be carried out by the villagers under their own leadership and through united efforts forged by local organisations with JBGVS acting as a catalyst. During the year, JBGVS undertook a number of development initiatives viz. watershed development, sanitation, healthcare, HIV / AIDs awareness and prevention, basic education, women empowerment etc.
It also initiated various income generation programmes, supporting 50 self-help groups women members and developed 400 vermicompost plots. It encouraged and facilitated entrepreneurship development through projects, like goat rearing, candle and paper dish production, shops and stalls etc. Through JBGVS encouragement and technical assistance, 4 educated youths installed cultivation facilities under polynet and 32 farmers have established WADI concept mango groves of 20 trees each. NABARD will partner with JBGVS for a Rs. 3. 50 crore WADI Project for the next seven years. The trust supported construction of low cost houses and latrines; conducted tests and provided treatment during the HIV / AIDs awareness programmes.
Samaj Seva Kendra (SSK) as part of JBGVS provides facilities for social development of the residents of Akurdi, Nigdi and adjoining townships, with the aim of improving their quality of life, through skill development training, hobby centre, nursery education, health care, sports, music, dance, cultural programmes etc. 12. New projects: Chakan 4-wheeler plant-The ‘Lite’ range of 4 wheeler vehicles, both in Passenger and Cargo segments of the Industry, are under re-design, to sharpen the competitive positioning of the products. Pg#16 The Cargo version code named ‘ PV 1500’ is likely to be launched in 2011. The Techno-economic feasibility for the Passenger 4 wheeler will be evaluated by Bajaj Renault-Nissan for a final decision, leading to firming up of the co-operation parameters among partners and a suitable JV Agreement. company continues to focus on expanding its design & testing teams, which has enabled it to make the new generation products.
R & D has enhanced its internal competencies by installation of advanced machines in proto shop and introduction of special equipments in testing areas. The expenditure on research and development during 2008-09 and in the previous year was: Rs In Million 2008-09 2007-08 i. Capital (including technical know-how) 310. 8 481. 4 ii. Recurring 837. 9 706. 0 1,148. 7 1,187. 4 iii. Total research and development expenditure as a NA NA percentage of sales, net of excise duty 1. 36 1. 37 Pg#17 13. Profits during recession: 2008-09 has been a tumultuous year for the global economy. The year began with a continuation of a world-wide inflationary spiral and ended with the worst slowdown since the Great Depression of the 1930s.
While India did not face a contraction in GDP growth like the USA, the Euro zone, the UK and Japan, it has witnessed a 250 basis point compression in growth rate – from 9% in 2007-08 to an expected 6. 5% or thereabout in 2008-09. The second half of 2008-09 has seen severe financial distress across broad sections of Indian industry-especially the manufacturing sectors. Companies have got re-rated; have scrapped investment plans and capital expenditure; cut down capacities; struggled with finances because of their earlier over- leveraged positions; delayed payments to vendors; and had to borrow funds at prohibitive interest rates. It is in this context that one must look at the performance of Bajaj Auto Limited (Bajaj Auto’, BAL or the Company’).
Despite falling demand in the motorcycle segment, the company has succeeded in maintaining an operating EBITDA (earnings before interest, taxes, depreciation and amortisation) margin of 13. 6% of net sales and other operating income. 14. Performance of the company: 14a,Total Sales: 2008-09 2007-08 (Nos. ) (Nos. ) Motorcycles 1,907,853 2,139,779 Other two-wheelers 11,772 21,316 Total Two wheelers 1,919,625 2,161,095 Three wheelers 274,529 290,312 Total Two & Three wheelers 2,194,154 2,451,407 Of the above, exports were Pg#18 Two wheelers 633,463 482,026 Three wheelers 139,056 136,315 Total Exports 772,519 618,341 14b,Financials: Rs. In Million 2008-09 2007-08 Net sales & other income 89,323 91,688 Gross profit before exceptional items, nterest & depreciation 13,140 14,162 14c,Motorcycle sales, domestic and exports (in numbers): Year Ended Salse Sales BAL (nos. BAL’s BAL’s 31st March (nos. growth Millions) growth market Millions) share 2003 3. 757 31. 3% 0. 868 32. 3% 23. 1% 2004 4. 317 14. 9% 1. 024 17. 9% 23. 7% 2005 5. 218 20. 9% 1. 450 41. 6% 27. 8% 2006 6. 201 18. 8% 1. 912 31. 9% 30. 8% 2007 7. 100 14. 5% 2. 379 24. 4% 33. 5% 2008 6. 544 (7. 8%) 2. 140 (10. 1%) 32. 7% 2009 6. 806 4. 0% 1. 908 (10. 8%) 28. 0% Sales growth: Source: SIAM and Company data:- 14d,Bajaj Auto’s exports (in numbers): Product 2007-08 2008-09 Growth Total two-wheelers 482,026 633,463 31 Pg#19 Three-wheelers 136,315 139,056 2
Total vehicles 618,341 772,519 25 The total value of exports was Rs. 26. 4 billion, representing a growth of 29%. 14e,Three-wheeler sales (in numbers): 2007-08 2008-09 Rate of growth Passenger vehicle sales: Industry sales 375,180 415,411 10. 7% Bajaj Auto sales 263,598 264,332 0. 3% Bajaj Auto market share 70. 3% 63. 6% (6. 7%) 14f,Goods carriers: Industry sales 130,826 82,382 (37. 0%) Bajaj Auto sales 26,714 10,197 (61. 8%) Bajaj Auto market share 20. 4% 12. 4% (8. 0%) 14g,Three-wheelers: Industry sales 506,006 497,793 (1. 6%) Bajaj Auto sales 290,312 274,529 (5. 4%) Bajaj Auto market share 57. 4% 55. 1% (2. 3%) Source: SIAM and Company data. Pg#20
The heartening news for this segment is that state governments have increased the permits for plying energy efficient three-wheelers. Bajaj Auto has a market share in excess of 90% in the permit-driven markets. The company also intends to introduce a RE Diesel upgrade in 2009-10, which will have a high mileage, accommodate more passengers with a luggage hold area, and will attempt to capture a larger share of the rural market. 13f, 15. Industrial relations: At Akurdi, the management signed the wage settlement on 18 July 2008 with Vishwakalyan Kamgar Sanghatana, the recognised union, in conciliation and accordingly, the benefits of the settlement have been given to all daily- rated employees at Akurdi.
Subsequently, with a view to downsizing the workforce at Akurdi, Voluntary Retirement Scheme was floated for the permanent dailyrated workmen. 2,331 workmen availed of the benefit under the scheme. Relations with staff and workmen across the plants at Akurdi, Waluj, Chakan Pg#21 and Pantnagar remained cordial. 16. Subsidiaries: PT. Bajaj Auto Indonesia (PT BAI), was incorporated as a subsidiary company in Indonesia with an issued, subscribed & paid-up capital of US$ 12. 5 million (Rs. 562 million) in 2006-07. Bajaj Auto holds 97. 5% shares in this company, with balance being held by a local partner. The subsidiary company has accumulated losses of Rs. 830. 7 million as on 31 March 2009.
Through the efforts, which are planned in the coming years, it is expected that PT BAI will turn around within a reasonable time. During the year under review, sales and service network reach have been expanded substantially covering the major cities of Jawa, Sumatara, Bali and Sulawesi islands. Total showroom strength stands at around 63 numbers, covering 46 cities of Indonesia. PT BAI assembles and markets Bajaj Pulsar and Bajaj XCD in Indonesia, establishing Bajaj as a high quality tech-savvy brand. PT BAI plans to expand its presence, product range and reach towards becoming a strong player in this market currently dominated by Japanese 2-wheeler majors.
Bajaj Auto International Holdings BV, Netherlands (BAIHBV) -was incorporated as a wholly owned subsidiary company in Netherlands with an issued, subscribed and paid-up capital of Euros 200,000 during 2007-08. Further capital of Euro 98. 2 million was invested in this company during the previous year, by way of premium. It is proposed to make strategic investments in overseas ventures, by way of equity shares and / or loans and to undertake related activities through this company. Pg#22 17. Spare parts Division: Automobiles need periodic replacement of parts. Not surprisingly, therefore, spare parts comprise a profitable business for major automobile manufacturers.
The objectives of spare parts business of Bajaj Auto are to perform an effective role in supporting new vehicle sales, maintain vehicle goodwill’ across different geographies, makes and consumer groups, and contribute to the bottom-line. These translate into three goals: * Make spare parts available to customer at all time. * Make them affordable. * Achieve profitable business growth and greater penetration. The company’s spare parts business has done well. Domestic sales of spare parts grew by 17. 5% to achieve a revenue of Rs. 5. 88 billion in 2008-09. And exports rose by 84% to Rs. 1. 45 billion. There is huge head room for further growth of this business.
Even today, despite significant expansion of Bajaj Auto’s authorised service network, more than 70% of the services during post-warranty period happens in the neighbourhood private garages. Hence, the challenge – and the business opportunity – is to make the company’s spare parts available in not only the authorised service centres but also the private garages and spare part shops that dot the country. This is a high volume, credit intensive business that requires mastery over the supply of heterogeneous products. To do so, Bajaj Auto created a separate channel exclusively for distribution of spare parts in 2004-05. Today, the channel has 73 distributors, who cater directly to over 15,000 retail shops across the country.
This channel now accounts for over 70% of total spare parts sales of BAL. The results demonstrate the success of the channel; and the data suggests that there is still scope for significant growth. Pg#23 Table 4: Bajaj Auto’s plant-wise capacities (in units): Plant 2007-08 2008-09 Waluj 1,860,000 1,860,000 Chakan 1,200,000 1,200,000 Pantnagar 900,000 900,000 Total 3,960,000 3,960,000 18. Corporate social responsibility activities: During the year, the company continued affirmative action and corporate social responsibility initiatives in various fields. The company continues to place emphasis on inclusive growth and has put in place certain processes for delivering the intended social outcome in measurable terms.
The company believes strongly that its competitiveness is interlinked with the well being of all sections of Indian society and that equal opportunity for all sections of the society is a component of its growth and competitiveness. The company is constantly endeavouring to ensure that no discrimination of any type is shown to the socially disadvantaged sections of the society in the work place. Education: The company has launched a programme that would help SC/ST students achieve academic excellence and make them on par with those, who can afford coaching for entrance to IITs. During the year under review, one student with a brilliant academic record was identified from the underprivileged and low-income group, for reimbursement of complete fees for the preparation of IIT entrance test under the guidance of IITians Prashikshan Kendra.
Under the central government initiative of Public Private Participation (PPP), the company has volunteered to adopt 3 ITIs (Industrial Training Institute) for up-gradation: Pg#24 * ITI Mulshi – A Memorandum of Agreement and Institute Development Plan are awaiting approval by the central government and funds are expected in the financial year 2009-10. The construction of a new building at Pirangut is in an advanced stage and is expected to be occupied by June 2009. * ITI Haveli – A Memorandum of Agreement and Institute Development Plan are awaiting final clearance from the central government. * ITI Ramnager near the Pantnagar Plant (Uttarakhand) – The Central Government has approved the Institute Development Plan. The Institute Management Committee has received the funds for the up-gradation.
Further developmental actions are currently underway. The company organised a two day training program for the Principals, Instructors and staff of the Institutes. This was done to ‘open the minds’ to ‘aim high’ and receive better ideas and go out and achieve excellence. A detailed individual action plan was set by each participant for further action by themselves. The other activities include: ? Bajaj Auto Ltd. was the first and only company to launch ecologically friendly CNG engines for three wheelers in Delhi. ? The company has been committed to its social and environmental responsibilities both within and outside the company, reiterating that a happy workforce is a productive workforce. Bajaj Auto promotes several welfare programmes for its employees as well as various initiatives related to environment, health, education and rural development in the communities around the plant areas. ? The company supports these initiative through the Jankidevi Bajaj GramVikas Sanstha, a registered charitable trust and a society. The trust oversees integrated development of twenty four villages adjoining the Pg#25 locations of BAL factories in Pune and Aurangabad. The activities are centered around improvement of natural resources, increased productivity of land, empowerment of women, health, education, sanitation and income generation programmes. ? Bajaj Auto Ltd. is also a member of the Prince of Wales International Business Leaders Forum and Business and Community Foundation. ? Bajaj AutoLtd. as started contributing toward the fight against AIDS in various ways, including committing funds for medicines for AIDS victims, committing funds for awareness campaigns against HIV/AIDS, providing free condoms, taking initiatives to promote HIV/AIDS awareness among employees and other community members, framing non-discriminatory policies regarding HV/AIDS and providing victims with a support system in the workplace, etc. 19. Awards Won by Bajaj Auto Ltd: Bajaj Auto Ltd. had several bountiful years with awards galore across its product line. NFO Customer satisfaction and CNBC-Auto Car Auto Awards, the most coveted awards in the industry, were all showered on Bajaj Auto. While ICICI Bank-OVERDRIVE bestowed three awards to Bajaj under various categories including the Bike Maker of the year, BBC World Wheels showered four awards including the viewer choice 2wheeler of the year to Pulsar 180 DTSi, BS Motoring awarded the coveted Bike Of The Year award to Wind 125.
NFO, the leading international marketing research firm awarded Bajaj Pulsar for Motorcycle Total Customer Satisfaction in the premium segment. The latest to confer the award, CNBC-Auto Car Award gave the “Two Wheeler of The Year Award” again to Wind 125. The rapid fire winning of awards by Bajaj Auto for almost all its product range – from the entry level Boxer, to the newly launched Wind 125 as well as for the DTSi technology – signals the changing face of Bajaj and its endeavour to offer Pg#26 technologically superior products across the entry, executive and premium segments. The winning of awards, which started as a trickle in 2001 has now become a deluge.
Product Award Award Body Bajaj Wind 125 Bike of the Year 2004 Business Standard Motoring Bajaj Wind 125 Two Wheeler of the Year 2004 CNBC AUTOCAR AUTOAWARDS 2004 Bajaj Pulsar DTS-i Bike of the Year 2004 ICICI Bank OVERDRIVE Awards 2004 DTS-i Technology Auto Tech of the Year 2004 ICICI Bank OVERDRIVE Awards 2004 BAJAJ AUTO Bike Maker of the Year 2004 ICICI Bank OVERDRIVE Awards 2004 Bajaj Boxer AT KTEC BBC World Wheels Award for Best Two Wheeler under Rs 30,000 BBC World Wheels Bajaj Pulsar 150 DTS-i BBC World Wheels Award for Best Two Wheeler between Rs 45,000 to Rs 55,000 BBC World Wheels Bajaj Pulsar 180 DTS-i BBC World Wheels Award for Best Two Wheeler between Rs 55,000 to Rs 70,000 BBC World Wheels Bajaj Pulsar 180 DTS-i BBC World Wheels Viewers Choice Two Wheeler of Year 2003 BBC World Wheels Bajaj Pulsar Motorcycle Total Customer Satisfaction Study 2003 NFO Automotive Bajaj Pulsar Bike of the Year 2003 ICICI Bank OVERDRIVE Awards 2003 Bajaj Pulsar Bike of the Year 2002 Business Standard Motoring Bajaj Pulsar Most Exciting Bike of the Year 2002 OVERDRIVE Bajaj Eliminator Bike of the Year 2002 OVERDRIVE Bajaj Eliminator Most Exciting Bike of the Year OVERDRIVE 2001 20. Research and development: Bajaj Auto has a huge, extensive and very well-equipped Research and Development wing geared to meet two critical organizational goals: development of exciting new products that anticipate and meet emerging customer needs in India and abroad, and development of eco-friendly automobile technologies. While the manpower strength of the R represents a cross-section of in-depth design and engineering expertise, the company has also been investing heavily in the latest, sophisticated technologies to scale down product development lifecycles and enhance testing capabilities.
Bajaj Auto R also enjoys access to the specialized expertise of leading international design and automobile engineering companies working in specific areas. Based on their own brand of globalization, they have built their distribution network over 60 countries worldwide and multiplied the exports from 1% of total turnover in Fiscal 1989-90 to over 5% in Fiscal 1996-97. The countries where their products have a large market are USA, Argentina, Colombia, Peru, Bangladesh, Sri Lanka, Italy, Sweden, Germany, Iran and Egypt. Bajaj leads Colombia with 65% of the scooter market, in Uruguay with 30% of the motorcycle market and in Bangladesh with 95% of the three-wheeler market.
Several new models are being developed specifically for global markets and with these the company will progressively endeavor to establish its presence in Europe too. 21. The Future: Although the avalanche of motorcycles offered Indian consumers a wide variety of models to choose from, it also resulted in increased pressure on the companies to concentrate on cost-cuts, technology enhancements and up- Pg # 28 gradations and styling. Their margins came under pressure as marketing costs escalated. The companies were forced to reduce prices and offer discounts to survive the competition. Moreover, analysts were skeptical about the segment’s ability to maintain the growth rate in the years to come.
One of the major assumptions underlying the motorcycles rush was that if the market was considerably large and was growing at a constant pace, there was room for a profitable existence for all brands. In 2001, there were over 30 motorcycle brands in the market. However, with the top five brands accounting for more than 60% of the market, only 40% of the market was available for all other new brands put together. Despite the launch of more vehicles, the survival prospects of many of the individual brands were deemed to be rather bleak. Further, the growth in the motorcycle segment was dependant on continuing favourable market conditions. Analysts claimed that to sustain this growth rate, the egment would have to completely cannibalize the market for scooters and a considerable part of the market for scooterettes and mopeds. Considering the fast growing scooterettes segment, with high demand from female customers, followed by the moderately growing moped segment and the restructuring in the scooter segment with major national and foreign players reinforcing their presence, it was unlikely that the entire growth in the two-wheeler sector would be due to motorcycles. Analysts also commented that as the two-wheeler industry had grown steadily for eight years, stages in the product life cycle would apply to the field sooner, rather than later and the decline stage would invariably come some day.
There was little differentiation between the brands being launched apart from styling as most companies had introduced their four-stroke vehicles. With the failure of the joint ventures, the expected introduction of cheaper Chinese brands, stringent emission norms and threat from major international players, the survival of indigenous brands looked uncertain. Constrained with the ruling price levels in the market place, limited infrastructure and lack of Pg#29 technological innovations when compared to their foreign counterparts, whether the Indian companies would succeed in generating the kind of volumes needed to sustain in the competitive motorcycle market, remains to be seen. 22.
Recommendations: Focus on High Margin Products: Around 50% of the two-wheeler consumers buy high quality products (products of executive and premium segment motorcycles). Margins on these products are higher. BAL should adopt a deliberate strategy of focusing on executive and premium segment motorcycles and three-wheelers, and a couple of brands on lower-end of motorcycles (To grab the market share) and scooters segment. High margin products – Pulsar, Discover, Three-wheelers, Avenger. Low margin products – Platina, Scooters, Mopeds. Now with increasing competition in the economy segment and limited scope from cost saving measures, it is believed this strategy of focusing on higher margin products would enable the company in retaining its operating margins. Below are other recommendations: – ?
Company should keep focusing on the fast growing motorcycle segment. ? In view of the new threat posed by Honda Motors in the scooter segment, the company needs to review its products line-up and launch new products to cater the changed demand. ? The company needs to take a look at its ungeared scooters offerings and need to adapt to the latest trends. ( compete with models like Honda Activa) ? The company needs to tap the export market more efficiently as there is a huge potential to make India as the world’s two-wheelers production base. For this, it needs to look for joint ventures abroad. ? It needs to target the young age group more effectively as this group is extremely trend savvy.
The advertising should have a fresh look and the product should live up to the Gen-X’s expectations. Pg #30 Learning Acquired: Able to understand that how the concepts that I have learnt from the book were used in the corporate world and how the companies are flexible enough to change according to their business requirements ( i. e. How the policies and the structures change). 23. References: ? www. bajajauto. com ? http://www. business-standard. com/india/news/bajaj-auto-revamps-organisational-structure/ ? http://www. karmayog. org/csr500companies/csr500companies_7373. htm ? www. wikipedia. org ? http://www. bma. ac. in/KnowledgeCentre/index1. html ? http://www. prdomain. com/companies/B/BajajAuto ? http://www. coolavenues. com/know/gm