Friday (Tomorrow) : Extra Class in

lieu of the class on 6/11

Time: 10.30 am to 11.15 am

Next Case: Spencer’s Tyre (Saturday).

Group write-ups are expected to be in.
BAJAJ AUTO CASE
I . DOMESTIC
MARKET 2.
EXPORT MARKET
This is a case on:
1. Different Orientations to
2. the Market, of the
Application
Marketing Mixamong
Was there Synergy Strategy
the Mix Elements?
(4Ps)
3. Application of
Environmental Factors,
(You should examine the implications)
4. Application of Marketing
Strategy Alternatives.
•Market Penetration
•Market Expansion
•Product Development, Diversification
Strategies)
(At what stage did Bajaj Ltd. change from one
BAJAJ AUTO’s EXPOSURE TO ENVIRONMENTAL FACTORS

1950’s-1980’s: GOVERNMENT POLICY

OF EXCESSIVE REGULATION

INDUSTRIAL DEVELOPMENT POLICY TO

AVOID OVERCAPACITY
• Regulations governing Product.
Licenses required for production
Capacity Restriction because of Capital
Scarcity
• Regulations governing Technology,
• Regulations governing Foreign Exchange.
Restrictive Import Policies.
•Marketing Implication
Pent up Consumer need for
Transportation
EFFECT OF INDUSTRIAL POLICY ON BAJAJ AUTO
LTD.
BACKGROUND

1950-1956: Initial Imports of Scooters & 3-

Wheelers from Piaggio (Italy), Vespa Brand
1959: Bajaj obtained a License to Produce
in India.
1960: Technical Collaboration with Piaggio
to Manufacture Vespa Brand in India. Plant
set up in Akurdi (Pune).
1960’s: Decade of Indigenization. Initial
1969 Government
Assembly with parts Policy Regulations
from Piaggio. Local
restricted increase
Components in Vespa in production
scooter were only 26%.
capacity.
Establishment of Dealer network in India.
Up till 1969 it was a SELLERS MARKET
(for 22 years). Demand more than
supply. Long Waiting lists, averaged 10
 DEMAND STATE:
Demand outstripped
capacity. It was a Protected
seller’s market..
What was Bajaj Auto’s
Market Orientation
during this period?
Application of the Selling
Concept.
It was a Selling Orientation.
(Take it or leave it attitude in a
seller’s market).

Protected market for BAL. Largest market share.

1971: New Government Regulations prohibited continuation
of Bajaj-Piaggio Alliance.
SHIFT IN 1980’s
What was BAL’s Market Orientation
during this stage?

Application of the Production

Concept.
It was a Production Orientation.
1980’s-1990’s Government Policy
Changed.
• Lifting of Restrictions.
• Lifting of Manufacturing capacity
constraints.
• Second Plant set up in Waluj
(Aurangabad). Production Operations in
2 shifts
 1990’s DECADE
Market demand fell. 1991-1992 Decline in
Domestic Demand by 5% (See pg. no)
1990-1995 ECONOMY IN RECESSION
• Recession of Indian economy in early
1990’s
• Inflation occurred simultaneously.
Inflation Rate = 13% average for
these five years.
• High Interest rates from Banks.
• Consumers felt the pinch. Decline in
Purchasing Power.This was the result of the
Production Orientation.
•Overcapacity in industry.
•Market saturation.
 Changing trends …
1993:
1. MARKET TASTES: Consumer tastes
were changing Value for money plus Visual
appeal
2. ENTRY OF COMPETITORS
COMPETITION: 6 Competitors All
had technical collaboration with
foreign companies. Competition from
Japanese
Whattwo-wheeler manufacturers.
was Bajaj Auto’s Marketing
Orientation at this stage?
Shift to the Customer Orientation. Application
of the Marketing Concept.
(Here we can apply the Characteristic Criteria of
the Marketing Concept)
Here we can apply the Characteristics of THE
MARKETING CONCEPT
Were these being fulfilled by
BAL?
These are the FOUR PILLARS OF THE MARKETING
CONCEPT
1. TARGET MARKET: First the company
must identify and define the target
market. No company can operate in all
markets.
2. CUSTOMER NEEDS: What is the customer’s
need? Customer oriented thinking require defining
customer needs from the customer’s point of view
3. INTEGRATED MARKETING All departments
work together to serve the customer’s interests.
The various marketing functions must work together.
4. PROFITABILITY Profits through customer
Eventual Shift in
1990’s to:
THE SOCIETAL MARKETING
CONCEPT
For Bajaj Auto: Legislation on Auto
Emission Standards
To deliver customer
needs/wants/interests more
effectively and efficiently than
competitors but in a way that
enhances consumers and society well
being.

IMPLICATIONS: …social and ethical

considerations into marketing
profits.
Is there a Difference between Societal
Marketing and Green Marketing?
THERE IS AN OVERLAP
SOCIETAL MARKETING CONCEPT: A
Product/Service must be beneficial to consumers as
well as to society.
EXAMPLE
• Marketing of Tobacco Products,
• New Drug Developments (Product)
• Anti Polio Campaign (Service plus Idea)
ALL SOCIETAL
• Drunken Driving (Idea) MARKETING IS NOT
GREEN MARKETING: May GREEN MARKETING
involve Marketing of a
Cause/Idea related to Society plus the
Environment: ALL GREEN MARKETING
EXAMPLE IS SOCIETAL
• Garbage Disposal (Littering) MARKETING

• Green Transportation Methods

 Comparing the Selling Concept and Marketing Concept
BAL 1980’s For Bajaj Auto Ltd.

Starting
point Focus Means Ends
Existing Selling and Profits through
Factory products promotion sales volume

This is an application of the Selling Concept

BAL 1993
Customer Delivered
Value
Customer Integrated Profits through
Market needs marketing customer
satisfaction

This is an application of the Marketing Concept

 Factors Influencing a Company’s
Marketing
Strategy
Marketing
Intermediaries
Demographic Distributors Technical/
economic M
physical
environment pl ark Environment
sy ann etin

st at ng
(Licensing/ JVs

n
em io
sy rm eti
st in g
em g
fo rk
in Ma
Product

Suppliers Place TARGET Price Publics

CUSTOMERS

tio nd
or Ma

en ion g

n
ta a
g r

em at tin
sy ani ket Promotion

pl niz ke
st z a i n g
im ga ar
em tio
Political/ n or M Social/
Legal Cultural
environment environment
Competitors
CASE ANALYSIS

BAJAJ AUTO Ltd.

What were the Environmental Factors/
Challenges that the company had to encounter
in formulating its Marketing Strategy ?
• Socio-Cultural
• Economic Environment
• Political/Legal : Licensing followed by Liberalization
(Successive Industrial Policy Changes).
• Technology (Infusions through JVs)
• Demographic Environment

Population size
MARKET
Age groups SEGMENTS WERE
Income levels EMERGING
Scooters
Urban Family
Educational Levels
Growth rate of population RURAL /URBAN
Motorcycles
SEGMENTS
Regional Distribution Rural demand
1993: BAL’s MARKETING STRATEGY

Conscious formulation of Marketing

Strategy.

Marketing objective: Increase sales to 1 million

units.
Maintain 50% market share
Market leadership in all 2 wheeler subcategories (Apply
Exhibit 7)

MARKETING MIX STRATEGY:

Mix of Product Strategy, Pricing Strategy,
Distribution and Advertising/Promotion
Strategy.
 EVALUATING THE MARKETING
MIX
Decisions to be taken by
the Company on:
PLACE
PRODUCT
The Four •CHANNELS
•PRODUCT VARIETY Ps
•COVERAGE
Was there Synergy •LOCATIONS
•QUALITY among BAL’s Marketing •INVENTORY
•DESIGN
•FEATURES
Mix elements ? •TRANSPORT
•BRAND NAME
•PACKAGING
•SIZES PRICE PROMOTION
•SERVICES
•WARRANTIES •LIST PRICE •ADVERTISING
•RETURNS •DISCOUNTS •SALES PROMOTION
•ALLOWANCES •PERSONAL SELLING
•PAYMENT PERIOD •PUBLIC RELATIONS
•CREDIT TERMS •DIRECT MARKETING
To what extent did Bajaj Auto
Implement the Marketing Concept?
BAL’s PRODUCT STRATEGY (1992)
• Product line Expansion: Full line of 2 and 3
wheelers to protect market share (12 models)
• Emphasis on Product Improvement
• Quality Improvement
• Phasing out of old models. Foreign
• Emphasis on Styling, features
Collaboration
• Improved suspension
with Kawasaki
• Better lighting
• Improved electrical system
• Electronic ignition
• Fuel economy
• Bajaj Scooter Upgrade program
• Product Strategy change to 4 stroke engine
• Use of fuel injection technology
DISTRIBUTION STRATEGY

• 330 Exclusive Dealers

• 75 Private Transport Companies
• Computerization of Distribution System.
Linking of Dealers to BAL Family.
• Spare Parts supply through Service/Dealer
Network.
• Extensive Distribution of Spare Parts.NESS
w a s a WEAK
• 800 Service Centres This
• No Credit Policy for Dealers
• Setting up of Regional Depots to improve
Availability and reduce lead time 8 Depots
• Dealer Satisfaction/Loyalty Competitive
Advantage
ADVERTISING/PROMOTION STRATEGY (1992)
Advertising as a % of Sales = (1% This was low to
compete effectively)
• Doubling of Ad Expenditure from 1991-
92 (Still only 1.2%)
• Competitive Ad Spend: Competitors also spent
1% of Sales.
•Need to Maintain Brand Awareness and Brand
Preference
•TV Advertising 45% of Total Media Expenditure
• Slice of Life Advertising. 45% Print
Advertising
• Emphasis in Print Ad on Technical
features/Kawasaki Brand Name
• Positioning of Product as an investment (Best
•
Resale Value)
• Cooperative advertising Matching Advt/Prom
PRICING STRATEGY

• Retail Price was increased by 7%

• Manufacturer Margin 15%.
• Dealers 4%
• Reasonable Pricing, Low Cost Producer
• 50% of Comparable Japanese Motorcycles
• Product Emission regulations by Govt
•Price premium 15%
COMPETITORS (1992)
Bajaj Auto: 46.5% (All 2 Wheelers)
Others: 53.5%

2 wheelers Bajaj Kawasaki 3 wheelers

Kinetic: Scooters Mopeds
Hero Motorcycles, Mopeds
LML Only scooters
Escort Only Motorcycles
TVS Motorcycles, Mopeds

FOREIGN COLLABORATIONS:
Bajaj-Kawasaki
Kinetic-Honda
Hero-Honda
LML-Piaggio
Escorts-Suzuki
 What were the MARKETING STRATEGY
ALTERNATIVES open to BAL? (1992)
Bajaj Auto was losing Market Share to
Competitors. (Decline in Domestic
1. Demand)
Should Bajaj Auto go for the Rural Market?
Large Growing Market.
Population in Rural Areas = 74%. BAL’s Market
Share (1992) = 60%.

Inference: Scope for Rural Market Penetration.

2. Should Bajaj Auto go for Exports?

3. Should Bajaj Auto Diversify into other

consumer durables in the Domestic Market? :
Fans, Geysers, Room Heaters.
Here it is necessary to do a
MARKETING
GROWTH
STRATEGIES
 MARKETING GROWTH
STRATEGIES
THE STRATEGIC-PLANNING GAP
Future
Desired
Desired Sales
sales
sales Diversification Growth
New Products, Strategy
New Markets The
Strategic-
Integrative growth planning
Sales

BACKWARD/ FORWARD/ HORIZONTAL INTEGRATION gap

Intensive growth
PRODUCT-MARKET GROWTH STRATEGIES

Expected
Existing
Existing
Products
Products
Sales
Two Wheelers
0 5 10
Time (years)
How could BAL achieve Intensive Growth …..
Three Intensive Growth Strategies: Apply
Ansoff’s Product/Market Expansion Grid
s ive Related Technology Unrelated
n
Inte owth Existing New Technology
Gr egies Products Products
at
Str BAL Started NEW MODELS STYLE, PRODUCT
With Two Wheelers DESIGN IMPROVEMENTSLINE EXPANSION

Existing
1. Market 3. Product
markets penetration development
URBA Strategy
N BAL Three
BAJAJ entry
MARK
into RURAL
Wheelers
ET
MARKET
SEGMENT
New 2. Market PASSENGER
CARS
markets development 4. Diversification
Strategy BAJAJ
EXPOR ELECTRICAL
T APPLIANCES
MARKE Cooking Ovens
Diversification Strategies may be:
• Concentric Diversification:
Same or RELATED TECHNOLOGY,
Different products for the same market.
(Auto Product Line Extension)
• Horizontal Diversification:
UNRELATED TECHNOLOGY, Different
Products for the Same Consumer market.
Note that Horizontal Diversification is different from
Horizontal Integration.
• Conglomerate Diversification: Entirely
DIFFERENT UNRELATED TECHNOLOGY,
different product for a DIFFERENT MARKET.
Example: Market Diversification Strategy
Wills Cigarettes. Diversification into:
•Lifestyle Clothing,
•Liquor, Beer,
•Frozen Foods, Soft Drinks.
 Strategic Establish Strategic
Business Units Business units
(SBUs)
SBU’s • Assign resources to
SBUs
WHAT IS AN SBU? • Plan new business,
-It is a single business/collection
downsize of
older
businesses. businesses
Example: BAJAJ AUTO Ltd SBU’s
PMU 1 PRODUCT
PMU 2 PMU 3
CATEGORY
Product line Extension
AUTO UNIT FINANCE ELECTRONICS
2 Wheelers UNIT Ovens PRODUCT
3 Wheelers Heaters SUB-
Cars PMU Light Bulbs CATEGORIE
S
PMU PMU

-It has its own set of Competitors.

HOW TO CLASSIFY BAJAJ AUTO’S SBU’S

SBU 1: Two Wheelers: 50cc Mopeds,

100 cc Motor Cycles,
150cc Scooters
ALL THESE will all normally comprise one
SBU.
SBU 2: Three Wheelers
SBU 3: Passenger Cars
These 3 SBUs (Subcategories had different market
growth rates).
SBU 4: Bajaj Auto Finance
SBU 5: Bajaj Electronics
EXAMPL
E
BAJAJ AUTO Ltd.
BAL SBU 2 BAL SBU 3
BAL SBU 1

Bajaj Auto BAL ELECTRONICS

Ltd FINANCE • Ovens
CONSUMER • Auto FInance • Heaters
3PRODUCTS
PMU’s
(PRODUCT
MARKET UNITS)

• 2 Wheelers
• 3 Wheelers
• Cars
BAL EXPORTS
• Accessories
• 2 Wheelers
• 3 Wheelers
 EXAMPLE : BAL COMPANY SBU’S:
PRODUCT PORTFOLIO MATRIX
MARKETS CONSUME INDUSTRIAL EXPORT GOVT
R /CORPORAT MARKET MARKET
MARKET E
SBUs MARKET
CONSUMER √ Yes √ Yes
PRODUCTS
SBU 1 WHAT IS AN SBU?
2 Wheelers
- A single business/collection
3 Wheelers
of businesses.
Cars - It has its own set of
FINANCE √ Competitors
Auto Loans SBU 2 -Own Strategic plan and
ELECTRONICS
Profit Performance
√
Ovens SBU 3 ?
Heaters
Light Bulbs
 THE PURPOSE OF
IDENTIFYING SBU’S IS TO
DEVELOP SEPARATE
STRATEGIES FOR EACH SBU
•Which Businesses to Invest In?
(The Investment Portfolio of a
Company) Market Opportunity
Analysis
•Assessing Each Business for
Resource Allocation
How Much to Allocate each Business
Unit (SBU)?
•Developing a Strategy/Game
Plan for Each Business.
Strategy for Achieving Long-term
objectives.
 EVALUATING THE SBU’S
PRODUCT PORTFOLIO OF A
COMPANY

This involves identifying and

defining the SBU’s (Strategic
Business Units)
HOW? Apply
the

BCG MATRIX
CLASSIFYING SBU’S BY PROFIT
POTENTIAL
Use of:
•BCG MODEL (Growth-Share Matrix)
(Boston Consulting Group Method)
Growth versus Relative Market Share
Relative Market Share= Market Share /Share of Largest
Competitor in the business 10%/ 70% - 0.14, 10%/
30%=0.3

•GENERAL ELECTRIC MODEL

(Market Attractiveness-
Business Strength) GE Model)
 Can we applythe
Applying the Boston
BostonConsulting Group Group
Consulting
Model to Bajaj Auto?
Growth-Share Matrix

20%-
Market Growth Rate

18%- Stars Question marks

4
16%- 3
?2 ? 1
?
HOLD
14%-
12%- 5

?
INVEST
10%-
8%- Cash cows Dogs
6%-
4%- DIVEST
8
2%- 6 HARVEST

0 7
10x 4x 2x 1.5x 1x .5x .4x .3x .2x .1x
MARKET SHARE
RELATIVE TO LARGEST Relative Market Share