The case discusses the business strategy of Bajaj Auto Limited (Bajaj Auto), a leading
Indian manufacturer of two wheelers. Bajaj Auto, which sold two wheelers in India since 1945, was the market leader in the Indian two wheeler industry till late 1990s.
However, the company failed to visualize the structural changes happening in the Indian two wheeler industry since the early 1990s. After the Indian economy was liberalized in 1991, foreign players entered the Indian two wheeler industry with their innovative products and sophisticated technology. In spite of rising competition, Bajaj Auto neither upgraded its scooter models, nor focused on the rapidly growing motorcycle segment.
In late 2001, Bajaj Auto initiated a transformation process in an effort to transform its image from being a scooter manufacturer to a motorcycle company. At the same time, the company continued its efforts to revive the geared scooter market.
The company continued to invest time and resources in the geared scooter segment even till the early 2000s when the sales of geared scooters were negligible as compared to the gearless scooters.
Bajaj Auto also failed to introduce innovative products in the rapidly growing gearless scooter market. The company lost its leadership status in the scooters segment to Honda Motorcycles and Scooter India (HMSI).
The case examines how Bajaj Auto became a follower both in the scooter and motorcycle segment from being the market leader in the Indian two wheeler industry.
On July 18, 2009, India-based Bajaj Auto Limited (Bajaj Auto), a leading manufacturer of two wheelers and three wheelers, launched the 100 cc Discover DTS-Si motorcycle.
The new product had several unique features such as a Digital Twin Spark-Swirl Induction (DTS-Si) engine, nitrox suspension, the longest wheelbase in the 100 cc segment, a 5 speed gear - the first in the 100 cc segment, and a maintenance free battery.
Commenting on the new product, Rajiv Bajaj (Rajiv), Managing Director, Bajaj Auto, said, "We are launching a bike which is not seen as a 100 cc bike and we wish to offer it to people who typically buy 100cc motorcycles but would like to upgrade.
For Bajaj Auto, the launch of the 100 cc Discover DTS-Si motorcycle served as a point of re-entry into the entry segment of the motorcycle market.
The company had reduced its focus on the entry segment
The company had reduced its focus on the entry segment motorcycles three years earlier, citing low operating margins, even though the entry segment motorcycles accounted for about 50 percent of the company's total sales volumes in 2006.
Commenting on the launch of the new product and the renewed focus on the 100 cc motorcycle segment, Rajiv said, "We are not changing our strategy. The 100 cc market has got numbers. All we wanted to do was give the commuter a choice, more value for money.
We have no choice but to have substantial share here Bajaj Auto, which had been selling two wheelers in India since 1945, was the market leader in the Indian two wheeler industry till the 1990s, riding on the success of its popular scooter models.
The company faced hardly any significant competition during that time, but this worked against the company. It grew complacent, with the result that it failed to realize the structural shift in demand toward motorcycles among Indian consumers.
The company faced hardly any significant competition during that time, but this worked against the company. It grew complacent, with the result that it failed to realize the structural shift in demand toward motorcycles among Indian consumers.
"Like Volkswagen Beetle, the product (Bajaj Chetak) had lost its relevance."1
- Rajiv Bajaj, MD, Bajaj Auto Ltd., in January 2006.
"The scooter segment in India is over one million units and the segment has been witnessing an impressive growth for the past few months. Further, there is a huge untapped segment of women customers, which offers immense growth potential."2
- Pawan Munjal, MD, Hero Honda Motors Ltd., in January 2006.
"Fact is, Bajaj was slow in reading the shift from scooters to motorcycles
Karuna Nayak [MBA FA]
Manager Fintech [INTERNSHIP]
Air Crews Aviation Pvt . Ltd.
Manager Fintech [INTERNSHIP]
Air Crews Aviation Pvt . Ltd.
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