BUSINESS POLICY

Bajaj Auto Limited

Bajaj Auto Ltd., the world's second-largest manufacturer of two- and three-wheeler vehicles, is

facing increasing competition in its domestic Indian market.

Case Overview:

The promoters of the Bajaj auto were already in the business of trading into auto parts under the

name “Bach raj trading corporation”. Later because of the experience they decided to enter in the

auto business. At that time there were two companies in the two wheeler market- Enfield India

with royal Enfield motorcycles and auto mobile products of India with lambretta scooters.

Initially Bajaj auto got the license for 48,000 scooters. Over time the capacity increased as the

case mentions that it now stands more than 10, 00,000 per annum. In 1971 Bajaj auto entered

into the three wheeler market as well through their in house R & D.

The two wheeler market is basically divided into three distinctive groups. Firstly scooter,

secondly motorcycle and thirdly mopeds. Each was designed to cater the varying segments.

Analysis of Table 1:

Table 1 shows the composition of two wheeler market in terms of scooters, motorcycles and

mopeds over the years. It can be observed that from year 1991-92 to 1998-99 the percentage of

scooters has decreased. However if we look at the percentages of motorcycles over the years we

can see that they have increased over the time. This is primarily because of the strengths as

mentioned in the case/ Whereas the mopeds remain almost the same.

Analysis of Table 2:

Table 2 shows the market share of the market share of Bajaj auto. Again we observe that over the

years that is from year 1991-92 to year 1998-99 the market share of the scooters has decreased to

almost 10%. In case of motorcycles the market share has increased over the years that is from

(1991-92 – 1996-97) but we see a decline in year 1997-98 and then it remains the same for the

next year. Therefore the total market share has decreased greatly over the years.

The decrease in the market share is primarily due to the entrants in the auto segment as

mentioned in the case like LML, Hero Honda and TVS Suzuki.

Analysis of Table 3:

Table 3 talks about the financials of Bajaj auto. The figures in the table show that sales have

increased over the years however the OPM that is the operating profit margin% has decreased

over time from year 1994- 1999. The higher the profit margin is, the better the company is

thought to control costs. But in the case of Bajaj Auto the profit margin is declining therefore it

is not good for the company. Furthermore they have a lot of equity available with them that is

119.4 crore. They should utilize that equity and cover up to catch up with competitors.

Core issue:

Due to increased competition in the auto industry, Bajaj auto remains behind because as

mentioned in the case that they are slow to environmental challenges and are not changing their

strategies as per the changing external environment.

Recommendations:

They need to do Product Development in order to increase their sales. As the case

mentions in the Annexure, the difference between Bajaj and LML is very clear. Bajaj

focuses on the economical side whereas the competitor focuses on the high performance

and key benefits provided by the product.

They need to do Product Marketing to highlight the features that they are providing and

the competitors are not because too much differentiation in auto industry is not possible

therefore focusing on the key aspects of the product will help company to gain back the

share.

Reviewing the competitors strategies will also help them.