37834370 bajaj auto strategic analysis

8/8/2019 37834370 Bajaj Auto Strategic Analysis

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A PROJECT REPORT

ON

“STRATEGIC ANLYSIS OF

BAJAJ AUTO LTD.”

1



INDEX

Chapter NAME PAGE NO

1 Company history

• Origins

• Completion in 1990

• End of licence raj

• New toola in 1990

3

4

4

5

6

2 Product profile and financial performance

• Motorcycles

• Three wheelers

• Overall performance

• Financial analysis

8

9

10

12

14

3

Strategic analysis

• Mission vision and values

• Logo

• Swot

• Porter five forces model

• Managerial style

• Business streategy

• Other strategic issue

18

19

20

21

23

24

25

26

4 Supply chain analysis

• Value chain

• Subsidiary

• Spare part division

27

28

30

31

5 CORPORATE SOCIAL RESPONSIBILITY 32

6 THE FUTURE 36

2



COMPANY HISTORY

• ORIGINS

•

COMPETITION IN 1980• END OF LICENSE RAJ

• NEW TOOLS OF 1990’S

• PRODUCT REVAMP IN 2000’S

3



Company History: Bajaj Auto Limited

The Bajaj Group is amongst the top 10 business houses in India. Its footprint stretches over a

wide range of industries, spanning automobiles (two-wheelers and three-wheelers), home

appliances, lighting, iron and steel, insurance, travel and finance.

Bajaj Auto Limited is India's largest manufacturer of scooters and motorcycles. The companygenerally has lagged behind its Japanese rivals in technology, but has invested heavily to catchup. Its strong suit is high-volume production; it is the lowest-cost scooter maker in the world.Although publicly owned, the company has been controlled by the Bajaj family since itsfounding.

Origins

The Bajaj Group was formed in the first days of India's independence from Britain. Its founder,Jamnalal Bajaj, had been a follower of Mahatma Gandhi, who reportedly referred to him as afifth son. 'Whenever I spoke of wealthy men becoming the trustees of their wealth for thecommon good I always had this merchant prince principally in mind,' said the Mahatma after Jamnalal's death.

Jamnalal Bajaj was succeeded by his eldest son, 27-year-old Kamalnayan, in 1942. Kamalnayan,however, was preoccupied with India's struggle for independence. After this was achieved, in1947, Kamalnayan consolidated and diversified the group, branching into cement, ayurvedicmedicines, electrical equipment, and appliances, as well as scooters.

The precursor to Bajaj Auto had been formed on November 29, 1945 as M/s Bachraj TradingLtd. It began selling imported two- and three-wheeled vehicles in 1948 and obtained amanufacturing license from the government 11 years later. The next year, 1960, Bajaj Auto became a public limited company.

Rahul Bajaj reportedly adored the famous Vespa scooters made by Piaggio of Italy. In 1960, atthe age of 22, he became the Indian licensee for the make; Bajaj Auto began producing its firsttwo-wheelers the next year.

Rahul Bajaj became the group's chief executive officer in 1968 after first picking up an MBA atHarvard. He lived next to the factory in Pune, an industrial city three hours' drive from Bombay.The company had an annual turnover of Rs 72 million at the time. By 1970, the company had produced 100,000 vehicles. The oil crisis soon drove cars off the roads in favor of two-wheelers,much cheaper to buy and many times more fuel-efficient.

A number of new models were introduced in the 1970s, including the three-wheeler goods carrier and Bajaj Chetak early in the decade and the Bajaj Super and three-wheeled, rear engine

4

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Autorickshaw in 1976 and 1977. Bajaj Auto produced 100,000 vehicles in the 1976-77 fiscalyear alone.

The technical collaboration agreement with Piaggio of Italy expired in 1977. Afterward, Piaggio,maker of the Vespa brand of scooters, filed patent infringement suits to block Bajaj scooter sales

in the United States, United Kingdom, West Germany, and Hong Kong. Bajaj's scooter exports plummeted from Rs 133.2 million in 1980-81 to Rs 52 million ($5.4 million) in 1981-82,although total revenues rose five percent to Rs 1.16 billion. Pretax profits were cut in half, to Rs63 million.

Rahul Kamalnayan Bajaj, 66, has stepped down as managing director of Bajaj Auto passing on

the mantle of the company to his eldest son, Rajiv. Rahul Bajaj will continue as the chairman of

the Bajaj conglomerate. Bajaj Auto is facing increased competition from Honda and Piaggio.

Honda has overtaken Bajaj as India's No.1 scooter maker in the past two years.

New Competition in the 1980s

Japanese and Italian scooter companies began entering the Indian market in the early 1980s.Although some boasted superior technology and flashier brands, Bajaj Auto had built up severaladvantages in the previous decades. Its customers liked the durability of the product and theready availability of maintenance; the company's distributors permeated the country.

The Bajaj M-50 debuted in 1981. The new fuel-efficient, 50cc motorcycle was immediatelysuccessful, and the company aimed to be able to make 60,000 of them a year by 1985. Capacitywas the most important constraint for the Indian motorcycle industry. Although the country's

total production rose from 262,000 vehicles in 1976 to 600,000 in 1982, companies like rivalLohia Machines had difficulty meeting demand. Bajaj Auto's advance orders for one of its newmini-motorcycles amounted to $57 million. Work on a new plant at Waluj, Aurangabadcommenced in January 1984.

The 1986-87 fiscal year saw the introduction of the Bajaj M-80 and the Kawasaki Bajaj KB100motorcycles. The company was making 500,000 vehicles a year at this point.

Although Rahul Bajaj credited much of his company's success with its focus on one type of product, he did attempt to diversify into tractor-trailers. In 1987 his attempt to buy control of Ahsok Leyland failed.

END OF LICENSE RAJ

The Bajaj Sunny was launched in 1990; the Kawasaki Bajaj 4S Champion followed a year later.About this time, the Indian government was initiating a program of market liberalization, doingaway with the old 'license raj' system, which limited the amount of investment any one companycould make in a particular industry.

5



It was hoping to increase its exports, which then amounted to just five percent of sales. Thecompany began by shipping a few thousand vehicles a year to neighboring Sri Lanka andBangladesh, but soon was reaching markets in Europe, Latin America, Africa, and West Asia. Itsdomestic market share, barely less than 50 percent, was slowly slipping.

By 1994, Bajaj also was contemplating high-volume, low-cost car manufacture. Several of Bajaj's rivals were looking at this market as well, which was being rapidly liberalized by theIndian government.

Bajaj Auto produced one million vehicles in the 1994-95 fiscal year. The company was theworld's fourth largest manufacturer of two-wheelers, behind Japan's Honda, Suzuki, andKawasaki. New models included the Bajaj Classic and the Bajaj Super Excel. Bajaj also signeddevelopment agreements with two Japanese engineering firms, Kubota and Tokyo R & D. Bajaj'smost popular models cost about Rs 20,000. 'You just can't beat a Bajaj,' stated the company'smarketing slogan.

The Kawasaki Bajaj Boxer and the RE diesel Autorickshaw were introduced in 1997. The nextyear saw the debut of the Kawasaki Bajaj Caliber, the Spirit, and the Legend, India's first four-stroke scooter. The Caliber sold 100,000 units in its first 12 months. Bajaj was planning to buildits third plant at a cost of Rs 4 billion ($111.6 million) to produce two new models, one to bedeveloped in collaboration with Cagiva of Italy.

NEW TOOLS IN THE 1990S

Still, intense competition was beginning to hurt sales at home and abroad during the calendar year 1997. Bajaj's low-tech, low-cost cycles were not faring as well as its rivals' higher-endofferings, particularly in high-powered motorcycles, since poorer consumers were withstanding

the worst of the recession. The company invested in its new Pune plant in order to introduce newmodels more quickly. The company spent Rs 7.5 billion ($185 million) on advanced, computer-controlled machine tools. It would need new models to comply with the more stringent emissionsstandards slated for 2000. Bajaj began installing Rs 800 catalytic converters to its two-strokescooter models beginning in 1999.

Although its domestic market share continued to slip, falling to 40.5 percent, Bajaj Auto's profitsincreased slightly at the end of the 1997-98 fiscal year. In fact, Rahul Bajaj was able to boast,'My competitors are doing well, but my net profit is still more than the next four biggestcompanies combined.' Hero Honda was perhaps Bajaj's most serious local threat; in fact, in thefall of 1998, Honda Motor of Japan announced that it was withdrawing from this joint venture.

REVAMPING THE DESIGN

Bajaj Auto had quadrupled its product design staff to 500. It also acquired technology from itsforeign partners, such as Kawasaki (motorcycles), Kubota (diesel engines), and Cagiva(scooters). 'Honda's annual spend on R & D is more than my turnover,' noted Ruhal Bajaj. Hisson, Sangiv Bajaj, was working to improve the company's supply chain management. Amarketing executive was lured from TVS Suzuki to help push the new cycles.

6



Several new designs and a dozen upgrades of existing scooters came out in 1998 and 1999.These, and a surge in consumer confidence, propelled Bajaj to sales records, and it began toregain market share in the fast-growing motorcycle segment. Sales of three-wheelers fell as somestates, citing traffic and pollution concerns, limited the number of permits issued for them.

SHARE IN COMPETITOR

In late 1999, Rahul Bajaj made a bid to acquire ten percent of Piaggio for $65 million. TheItalian firm had exited a relationship with entrepreneur Deepak Singhania and was looking toreenter the Indian market, possibly through acquisition. Piaggio itself had been mostly boughtout by a German investment bank, Deutsche Morgan Grenfell (DMG), which was looking to sellsome shares after turning the company around. Bajaj attached several conditions to his purchaseof a minority share, including a seat on the board and an exclusive Piaggio distributorship inIndia.

Employment fell from about 23,000 in 1995-96 (the year Bajaj suffered a two-month strike at its

Waluj factory) to 17,000 in 1999-2000. The company planned to lay off another 2,000 workers inthe short term and another 3,000 in the following three to four years.

Principal Subsidiaries: Bajaj Auto Finance Ltd.; Bajaj Auto Holdings Ltd.; Bajaj ElectricalsLtd.; Bajaj Hindustan Ltd.; Maharashtra Scooters Ltd.; Mukand Ltd.

Principal Competitors: Honda Motor Co., Ltd.; Suzuki Motor Corporation; Piaggio SpA.

7



PRODUCT PROFILE AND FINANCIAL

PERFORMANCE

• Motorcycles

• Three wheelers

• Overall performance of the company

•

Financial ratio analysis

8



Products

Motorcycles

Two-wheeler sales of Indian players are dominated by the domestic market and, within it, by

motorcycles. After growing at a sharp clip from the late 1990s, motorcycle sales witnessed a

7.8% drop in volume in 2007-08, due to falling domestic demand as a result of rising interest

rates and many private sector banks reducing their retail lending exposures. 2008-09 saw a

modest increase in motorcycle sales of 4%, driven largely by growth in cash sales. Even so, sales

of motorcycles (both domestic and exports) in 2008-09 has been lower than what it was in 2006-07, before the slowdown hit this sector. Chart A depicts the data from 1998-99.

Chart A: Sales of two-wheelers (million units)

9



Despite the slight uptick in the industry’s sales volume, Bajaj Auto did not maintain volume

growth, for reasons that will be discussed below. From 1.66 million motorcycles in 2007-08, the

company’s domestic sales fell by23% to 1.28 million units in 2008-09. Some of this was

compensated by a 31% increase in exports to 631,383 units. But it was not enough Consequently,

Bajaj Auto’s market share (domestic and exports, combined) fell from 32.7% in 2007-08 to 28%

in 2008-09. Table 1 gives the data.

Table 1: Motorcycle sales, domestic and exports (in numbers)

Year ended

31 March

Sales (nos.

Millions)

Sales growth BAL (nos.

Millions)

BAL’s

growth

BAL’s

market share2003 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%

Source: SIAM and Company data

Motorcycles: Domestic Sales for the Industry

The company classifies motorcycles into three segments, based on consumer categories and

approximate price points. These are:

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Motorcycles of Bajaj can be categorized as:

SEGMENT OF

BIKES

FEATURES BAL PRODUCTS COMPETITORS

PRODUCTS

Entry segment: 100 cc motorcyclesat Rs.35, 000.

the Platina. Thesegment accounted

for 34% in India in

2008-09

Hero Honda PassionPlus

Executive segment: comprises 100 cc to

135 cc motorcycles,

priced between

Rs.40, 000 to Rs.50,

000.

In this segment with

two brands: XCD and

Discover.

HERO HONDA CBZ

Extreme and

Splendour

Performance segment: These are sleek, high

performance, with

price points in excess

of Rs.50, 000.

flagship brand, the

Pulsar, and our

cruiser, the Avenger.

BAL dominate this

space, with a

domestic market

share in excess of

47%.

HEO HONDA

Karizma and Hunk

11



Three-wheelers

The company’s domestic sales of three-wheelers in 2008-09 were 12% lower compared to the previous year, and stood at 135,473 units. Export demand grew at 2% to 139,056 units (see Table

2 above). However that was not sufficient to prevent a decline in the company’s total three-

wheeler sales — which fell by 5.4% to 274,529 units in 2008-09. Given that total industry sales

shrank by 1.6% in 2008-09 over the previous year, while Bajaj Auto’s fell by 5.4%, the

company’s market share dropped by 2.3 percentage points to 55.1%. At this market share

however, Bajaj Auto remains the leading three-wheeler player in India.

Table gives the data.

Passenger vehicle sales: 2007-08 2008-09 Rate of growthIndustry 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%)

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%)

Total 3-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.

12



Overall Performance of the company:Financials: (Rs. In Million )

2008-09 2007-08Net sales & other income 89,323 91,688

Gross profit beforeexceptional items,interest & depreciation 13,140 14,162

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 2 & 3 wheelers 2,194,154 2,451,407 Of the above, exports were

Two wheelers 633,463 482,026 Three wheelers 139,056 136,315 Total Exports 772,519 618,341

13



FINANCIAL ANALYSIS OF BAJAJ AUTO

Liquidity and Solvency ratio’s

This ratio suggests the short-term liquidity position of the firm. The following ratios are to

be calculated.

(i) Current Ratio.

Current Assets = Debtors + Cash/Bank + Marketable Non Trade Investments + Stock + Loans &

Advances + Prepaid Expenses.

Current Liability = Creditors + Bank Overdraft + O/S Expenses. The ideal ratio is 2:1

Analysis:-Current ratio is higher in 2009 as compared to 2008. There is decreased all current

assets except other receivables which increased in 2009. The net current assets increased by

Rs.238.62 cr. in 2009 and at same time current liabilities increased by Rs.200.9 cr. in 2009. It

means Bajaj Auto Ltd., has sufficient current assets to pay current liabilities. Short term solvency

of the company is satisfactory.

14

Year Current Assets

(Rs. In cr.)

Current Liabilities

(Rs. In cr.)

Current Ratio

2008 1780.67 2019.29 0.88 times.

2009 2401.45 2602.35 0.92 times.



(A) Management Efficiency ratio’s

This ratio finds how efficient the management is in their decision-making & utilization of

the production capacity & other resources.

(i) Inventory Turnover Ratio.

Year Sales Turnover

(Rs. in cr.)

Inventory

(Rs. in cr.)

Inventory Turnover Ratio

2008 9856.66 349.61 28.19

2009 9310.24 338.84 27.47

Analysis:-

The inventory turnover ratio in the year 2008 was 28.19 which indicate that 28.19 times in a year

the inventory of the firm is converted into receivables or cash. However, in 2009, the inventory

turnover ratio slightly decreased to 27.47. This was due to the fact that the Bajaj Auto Ltd. in

2009 invested more then 0.72 times the inventory in 2008.

15



PROFITABILITY RATIO

Gross Profit Ratio

Year NPAT

(Rs. in

cr.)

Net sales

(Rs. in

cr.)

Profit Margin

2008 755.95 8827.15 8.56 %

2009 656.48 8700.17 7.55 %

Analysis:-

The profit margin has decreased from 8.56% in 2008, to 7.55% in 2009. According to the

figures, company has been successful in decreasing their Sales by Rs.126.98 cr. in 2009 but the

increases in net income available common stock holders was 111% which leaded to a decrease in

the profit margin.

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(B) Market Value Ratio.

Price Earning Ratio.

Year Price Per Share

(Rs. in cr.)

Earning Per Share

(Rs. in cr.)

PER

2008 10 52.25 0.19

2009 10 45.37 0.22

Analysis:-

It can be seen from calculations that in year 2009 the ratio is more than doubled from 0.19 to

0.22. This was due to the fact that the price per share over the year has same with Rs.10 per share

where as book value per share increased by just Rs.109.73 to Rs.129.23.

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STRATEGIC ANALYSIS

a)Vision mission and values

b)Logo

c)SWOT Analysis

d)Porter’s five Forces Model Analysis

e)Managerial style

f) Business strategies

g)Other strategic issues

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VISION MISSION AND VALUES

Bajaj doesn't have a straight vision or mission statement. They define it in terms of brandidentity, brand essence (derived from mission) and brand values.

Our Brand Identity

Our Brand is the visual expression of our thoughts and actions. It conveys to everyone our intention to constantly inspire confidence. Our customers are the primary audience for our brand.

Indeed, our Brand Identity is shaped as much by their belief in Bajaj as it is by our ownvision.

Everything we do must always reinforce the distinctiveness and the power of our brand. We can do this by living our brand essence and by continuously seeking to enhance our

customers’ experience. In doing so, we ensure a special place for ourselves in the hearts and the minds of our

customers.

Our Brand Essence

Our Brand Essence is the soul of our brand. Our brand essence encapsulates our mission at Bajaj. It is the singular representation of our terms of endearment with our customers. It provides the basis on which we grow profitably in the market. Our Brand Essence is Excitement. Bajaj strives to inspire confidence through excitement engineering. Blending together youthful creativity and competitive technology to exceed the spoken

and the implicit expectations of our customers. By challenging the given. By exploring the unknown and thereby stretching ourselves

towards tomorrow, today.

Our Brand Values

We live our brand by its values of Learning, Innovation, Perfection, Speed and Transparency.

Bajaj will constantly inspire confidence through excitement engineering.

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Learning

Learning is how we ensure proactivity. It is a value that embraces knowledge as the platform for building well informed, reasoned, and decisive actions.

• Innovation

Innovation is how we create the future. It is a value that provokes us to reach beyond theobvious in pursuit of that which exceeds the ordinary.

• Perfection

Perfection is how we set new standards.It is a value that exhibits our determination toexcel by endeavoring to establish new benchmarks all the time.

• Speed

Speed is how we convey clear conviction. It is a value that keeps us sharply responsive,mirroring our commitment towards our goals and processes.

•

TransparencyTransparency is how we characterise ourselves. It is a value that makes us worthy of credibility through integrity, of trust through sensitivity and of loyalty throughinterdependence.

LOGO of BAJAJ:

INITIAL LOGO (upto 2004) CHANGED LOGO (upto2007)

LATEST LOGO (since 2007)

Hexagonal blue and whitelogo

Completely blue logo tosignify modernity and

dynamism

To stress the leadership position of the brand in

the market

20



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)

Threats:

The competition catches-up any new innovation in no time.

Threat of cheap imported motorcycles from China.

21



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.

22



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 isoutsourced. Proper supply chain management is a costly yet critical need.

Buyer's Bargaining Power: Buyers in automobile market have more choice to choosefrom 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 matchedin a few months by competitor. This instinct of the industry is primarily driven by thetechnical capabilities acquired over years of gestation under the technical collaboration withinternational players.

Substitutes: There is no perfect substitute to this industry. Also, if there is any substituteto a two-wheeler, Bajaj has presence in it. Cars, which again are a mode of transport, donever directly compete or come in consideration while selecting a two-wheeler, cycles donever even compete with the low entry level moped for even this choice comes at a

comparatively higher economic potential.

Managerial Style:Off late Bajaj Auto Limited, India’s premier automotive company, has emphasiseda lot on organizational restructuring for the Auto business. With this restructuring,the existing business roles and responsibilities at the company has beenstrengthened and enhanced to ensure greater operational empowerment andeffective management.

The five pillars of this new structure (Strategic units) are R&D, Engineering, TwoWheeler Business Unit, and Commercial Vehicles Business Unit & InternationalBusiness Unit. These pillars will be supported by functions of Finance, MIS, HR,Business Development and Commercial.

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Pradeep Srivastava, who was VP-Engineering prior to restructuring, will now bePresident- Engineering. As per the reorganized structure the company will havethree CEO’s. S. Sridhar, currently, VP, Mktg. & Sales Two-Wheelers, will nowhead the Two Wheeler Business Unit as CEO with manufacturing operations atWaluj 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 CEOfor its International Business. The three CEO’s will be responsible for Top line,Business Growth & profitability of their respective businesses. Abraham Josephwill continue to lead Research & Development.

Business Stratergies:Marketing Strategies:

The focus of BAL off late has been on providing the best of theclass models at competitive prices. Most of the Bajaj models comeloaded with the latest features within the price band acceptableby the market. BAL has been the pioneer in stretchingcompetition into providing latest features in the price segment byupdating 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 themotorcycle segment. The target customer was the father in thefamily but the target audience of the commercial was the son inthe family. The time at which Kawasaki 4S was launched HeroHonda was the market leader in fuel-efficient bikes and Yamaha inthe performance bikes.

Boxer - It took the reins from where the Kawasaki 4S left. Targetwas the rural population and the price sensitive customer. Boxer

marketed as a value for money bike with great mileage. Largerwheelbase, high ground clearance and high mileage were theselling factors and it was in direct competition to Hero HondaDawn and Suzuki MX100. Caliber - The focus for the Caliber 115 was youth. And thoughBajaj made the bike look bigger and feel more powerful than its

24



predecessor (characteristics that will attract the average, 25-plus,executive segment bike buyer), its approach towards advertisingis even more radically different this time around. Bajaj gave themandate for the ad campaign to Lowe, picking them from theclique of three agencies that do promos for the company (theother two being Leo Burnett and O&M). Going by the initialmarket response, the campaign was clearly a hit in the 5-10 yearsage bracket. So, the teaser campaign and the emphasis on theCaliber 115 being a `Hoodibabaa' bike placed it as a trendymotorcycle for the college-goers and the 25 plus executives bothat the same time.

Pulsar - Pulsar was launched in direct competition to the HeroHonda's 'CBZ' model in 150 cc plus segment. The campaign

beared innovative punch line of "Definitely Male" positioningPulsar to be a masculine-looking model with an appeal to theperformance sensitive customers. The Pulsar went one step aheadof Hero Honda's 'CBZ' and launched a twin variant of Pulsar withthe 180 cc model. The model was a great success and has alreadycrossed 1 million mark in sales.

Discover - The same DTSI technology of Pulsar extended to 125cc Discover was a great success. With this, Bajaj could realize its

success riding on the back of technological innovation rather thanthe joint venture way followed by competitors to gain marketshare.BAL now is taking a leaf out of the FMCG business model to takethe company to greater heights.Bajaj has kicked off a project tocompletely restructure the company's retail network and createmultiple sales channels.Over the next few months, the company will set-up separate saleschannels for every segment of its business and consumers. BajajAuto's entire product portfolio, from the entry-level to thepremium, is being sold by the same dealers. The restructuring willinvolve separate dealer networks catering to the urban and ruralmarkets as well as its three-wheeler and premium bikessegments. Bajaj Auto also plans to set-up an independent networkof dealers for the rural areas. The needs of financing, selling,distribution and even after-sales service are completely different

25



in the rural areas and do not makes sense for city dealers tocontrol this. The company also plans to set-up exclusivedealerships for its three-wheeler products instead of having themsold through an estimated 300 of its existing dealers.

26



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 inthe two-wheeler market is set to intensify. TVS Motors and HeroHonda are on a product expansion binge. To fight this battle andretain its hard-earned market share in the motorcycle segment,Bajaj Auto will need its cash muscle. A look at its own story overthe past five years provides valuable insight.

Stake for Kawasaki: Bajaj Auto's attempt to vest the surpluscash 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'srecent models, and its brand name is also more visible in Bajajbikes than in the past.

Better value proposition: Shareholder interests may be betterserved if the cash is retained to pursue growth in a tough market.

This would also obviate the need to fork-out fancy sums as stampduty to the government for the de-merger. A combination of alarge one-time dividend and a regular buyback program throughthe tender route may offer better value. A strategic stake forKawasaki would only positively influence the stock's valuation.

Strategies for the Overseas Markets:Bajaj Auto looks at external markets primarily with threestrategies: -1) A market where all BAL need to do is distribute through CKD orCBU routes.2) Markets where BAL need to create new products.

3) Markets where BAL need to enter with existing products andprobably with a good distributor or a production facility or a jointventure.

Earlier, most of the products that Bajaj exported were scootersand some motorcycles. However, in its target markets, like inIndia, the shift was towards motorcycles. With the expansion in

27



Bajaj's own range to almost five-six platforms of motorcycles, ithad a better offering to export, also the reason for its strongershowing. For the last fiscal, 60 per cent of its exports were two-wheelers and the rest three-wheelers. Exports to middle Africaand the Saharan nations. Egypt and Iran also continue to bestrong markets for Bajaj.

28



SUPPLY CHAIN ANALYSIS

• Value chain management

• Subsidiaries

• Spare part division

29



Value Chain Management

Vendors – Bajaj Auto has a consolidated base of 180 vendors supplying components to all Bajaj

Auto’s plants. A large number of vendors are located either near Pune or Aurangabad. Those that

are far are encouraged to tie up with third party logistics providers, who along with local vendors

supply multiple deliveries daily to Chakan & Waluj plant. Bajaj Auto has extended the TPM

(Total Preventive Maintenance) to vendor as well. Around 60% by value of Bajaj vehicle is

outsourced. Virtually no components are imported & 70% of Bajaj Auto’s requirements are

sourced from within the state of Maharashtra. To improve quality, Bajaj Auto has also begunactively assisting its suppliers in finalizing joint ventures with counterparts in Japan, Italy,

Taiwan & Spain.

Key suppliers :

Bajaj auto has approximately 198 suppliers for their raw materials.

Some of the key suppliers are :-

• JBM - Frames

• MRF & Dunlop – tires

• Minda - locks & ignition system

• Reinder – headlamps & lights

• Endurance – brakes, clutch & Cast wheel

• Varroc – Plastic parts & Digital Meter

• Max auto components – ignition system and switches

• Silco cable – wires and cables

• Makino industry – Brake shoes . Brake lining, clutch center

• Inder auto industries- Chambers, Gaskets, Cylinder Piston kit.

• KBX – disk Brakes assembly

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Inventory policy-

Bajaj auto maintains seven days inventory . Demand Estimations were based on Panel

Regression, which takes into account bothtime series and cross section variation in data .All the

Mediators are connected with each other through IT linkage to know exact status of delivery of

goods

Manufacturing locations

Akurdi, Pune 411035

This is one of the oldest plant of bajaj auto ltd with production capacity of 0.6 million vehicles/

year. The plant has been closed in order to equip for four wheeler production

Bajaj Nagar, Waluj Aurangabad 431136

This is second plant with production capacity of 0.86 million/ year .products manufactured here

are Kristal, XCD and platina and commerial GC series

Chakan Industrial Area, Chakan , Pune 411501

This is the biggest plant of bajaj auto Production Capacity of 1.2 million/ year , Product

manufactured here are pulsar and avenger and commercial Ge series

Pantnagar , Uttarakhand

The most advanced plant of bajaj auto .It has Capacity of 0.9 million vehicles per year . product

manufactured here are platina and XCD

Dealers- Bajaj Auto has a network of 422 dealers and over 1,300 authorized service centers. The

company plans to increase the number of dealers to 500 by this financial year. A large number of

these new dealerships are planned in semi-urban & rural areas.

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During the financial year 2007-08, the company extended BASS (Bajaj Auto Service Standard)

to standardize the workshops of 250 dealers & 50 authorized service centers. These programmers

included a uniform external & internal look. This initiative has improved work hygiene,

promoted consistent & better service quality, & greater productivity. Faster turnaround of

serviced vehicles coupled with higher spare parts sales in converting such workshops into

independent profit centers for the dealers.

Value chain of the company

Subsidiaries:

PT. Bajaj Auto Indonesia (PT BAI), was incorporated as asubsidiary 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 balancebeing held by a local partner. The subsidiary company hasaccumulated losses of Rs. 830.7 million as on 31 March 2009.

Through the efforts, which are planned in the coming years, it isexpected that PT BAI will turn around within a reasonable time.

During the year under review, sales and service network reachhave been xpanded substantially covering the major cities of

Jawa, Sumatara, Bali and Sulawesi islands. Total showroom

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strength stands at around 63 numbers, covering 46 cities of Indonesia.

PT BAI assembles and markets Bajaj Pulsar and Bajaj XCD inIndonesia, establishing Bajaj as a high quality tech-savvy brand.PT BAI plans to expand its presence, product range and reachtowards becoming a strong player in this market currentlydominated by Japanese 2-wheeler majors.

Bajaj Auto International Holdings BV, Netherlands (BAIHBV) -wasincorporated as a wholly owned subsidiary company inNetherlands with an issued, subscribed and paid-up capital of Euros 200,000 during 2007-08. Further capital of Euro 98.2 millionwas invested in this company during the previous year, by way of

premium. It is proposed to make strategic investments inoverseas ventures, by way of equity shares and / or loans and toundertake related activities through this company.

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 businessof Bajaj Auto are to perform an effective role in supporting newvehicle sales, maintain vehicle goodwill' across differentgeographies, makes and consumer groups, and contribute to thebottom-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. Domesticsales 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.1.45billion. There is huge head room for further growth of thisbusiness. Even today, despite significant expansion of Bajaj Auto'sauthorised service network, more than 70% of the services duringpost-warranty

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CORPORATE SOCIAL RESPONSIBILITIES

• Environmental friendly techniques

• Community leadership programmes:health education

• Other CSR activities

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•

CORPORATE SOCIAL RESPONSIBILITY

Cost effective and Environmental strategies:

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 productionperiods, energy efficient screw compressors by replacing CPTcompressors, real timer electrical circuits installed to switch off

electrical equipments during lunch / tea breaks and during nonutilisation of production equipments, fan less cooling towers forAC plants, high efficiency reflector fittings with electronic ballaststube lights, use of LED & CFT street lights, replacement of 350 Wair circulators by 180 W air circulators, 150 W MH lamps insteadof 250 W HPSV lamps at shop floors, Variable Frequency DrivesVFD) for ASUs in paint shops, washing machine blowers,compressors etc and rationalisation of pumping hours of mainpump as well as booster pump of pump house. Water saving was

achieved by replacement of old under-ground water pipes withaboveground pipes to avoid water wastage through leakage, dripirrigation system for gardening, installation of localised freshwater storage systems, usage of treated water for bin washingand paint shop process, rain water harvesting and use of bio-chemical additives to reduce frequency of water change in variouspaint 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 insidefurnaces for better heat retention, three-wheeler electro-deposition (ED) painting process changed from Acrylic ED toCathodic ED, optimisation of loading pattern in CGC and sealquench furnaces, reduction of hot water temperature for pre-treatment, use of bio- gas for cooking in canteens, start-up lossesin ovens and hot water generation plants and changed design of paint jigs to reduce jig stripping frequency.

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Impact of measures taken:As a result of the initiatives taken for conservation of energy andnaturalresources, the company has effected an overall reduction inconsumption asunder:-

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Investment / savings:Investment for energy conservation activities: Rs.9.35 million

Saving achieved through above activities: Rs.24.2 million

Community leadership programmes:

During the year, the employees volunteered for blood donationcamp at Deenanath Mangeshkar Hospital, Pune and Dr Susheela

Tiwari Hospital, Pantnagar Fire fighting teams of the companyalong with vehicles responded to 20 Fire assistance calls fromGovernment Fire Department / other industrial units outside thefactory premises in the larger interests of saving invaluable lifeand property.

Community Care:In line with the commitment to enrich the life of all with whombajaj deals, it showes sensitivity to the employees, who opted forvoluntary retirement at the Akurdi Plant. Soon after the Akurdiemployees expressed their interest in accepting the VoluntaryRetirement Scheme, the company organised a series of

interactive meetings with leading financial institutions. Theofficers explained theneed to prudently and safely invest the monies received,considering the various options available today. The companydevised attractive schemes for interested employees so that theycould receive regular monthly payments, in addition to lump sumcompensation announced. They were also provided with optionsof 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, areindependently self-sustaining and can take good care of theirfamilies. Employees were also guided for alternative possibilities,whether as employee or entrepreneur.

Health:

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Government of India- Ministry of Health and Family Welfare -National Aids Control Organisation (NACO) and CII have initiatedPublic Private Partnership (PPP) in order to provide betterhealthcare to AIDs patients. The company has signed a tripartiteMoU 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 otherorganisations have visited the ART centre, which is the largestunit run by an industry under Public Private Partnershipprogramme. Apart from two doctors and six supporting medicalstaff, the ART centre has added audio-visual facilities for group

counseling, as a result of which the ART centre registration hasreached 1,900 numbers and the unit is recognised today as one of the best ART centres in the country. Rural and communitydevelopment activities and empowerment of women.

Education: The company has launched a programme that would help SC/STstudents achieve academic excellence and make them on parwith those, who can afford coaching for entrance to IITs. During

the year under review, one student with a brilliant academicrecord was identified from the underprivileged and low-incomegroup, for reimbursement of complete fees for the preparation of IIT entrance test under the guidance of IITians PrashikshanKendra.Under the central government initiative of Public PrivateParticipation (PPP), the company has volunteered to adopt 3 ITIs(Industrial Training Institute) for up-gradation:* ITI Mulshi* ITI Haveli* ITI Ramnager

The other activities include:

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• Bajaj Auto Ltd. was the first and only company to launchecologically friendly CNG engines for three wheelers in Delhi.

• Bajaj Auto promotes several welfare programmes for its

employees as well as various initiatives related toenvironment, health, education and rural development in thecommunities around the plant areas.

THE FUTUREBajaj-Renault-Nissan to drive small car (ULC)

Bajaj Auto has redrafted its bike strategy for this fiscal that will see the Pulsar and Discover actas the key growth drivers. The script goes according to plan, it has have set ourselves a target of

200,000 units from both brands by March 2010. Bajaj Auto and the Renault-Nissan Alliance to

build the car code- named ULC with wholesale price range starting from 2500 USD

All this is part of a renewed thrust by the company to focus on two key requirements of the

market which, over the years, have pretty much remained constant for either fuel-efficientcommuter bikes or sporty, powerful products. The Discover has now been positioned to fulfill

the former need in a segment where Hero Honda reigns supreme while the Pulsar has established

itself in the sporty slot, with monthly sales of over 40,000 units.

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Bajaj Auto Ltd has announced that the company may launch a small car in the year 2010 in

India. The second largest two wheeler maker in India will enter the small car segment in

partnership with French car giant Renault and Nissan. The small car prototype was unveiled

today and the company wants to promote the vehicle as economical and affordable car. The Bajaj

Auto’s car will be expensive as it will meet safety and emission norms. The standard version will

come with an air conditioner.

Bajaj Auto has said in a statement that the car will offer a mileage of 34 kilometer per litter.

Bajaj will launch the car in Petrol and Diesel variants. Bajaj has plans to manufacture the small

car at its facility in Chakan near Pune.

Bajaj Auto Ltd = 50 per cent

Bajaj Auto, which is yet to sign a joint venture agreement with its partners, Renault and Nissan.

The ULC project was conceived as a three-way alliance where Bajaj would hold 50 per cent

equity.

Renault = 25 per cent

The ULC project was conceived as a three-way alliance where Renault would hold 25 per cent

equity.

Nissan = 25 per cent

The ULC project was conceived as a three-way alliance where Nissaan would hold 25 per cent

equity.

Bajaj Auto, which is yet to sign a joint venture agreement with its partners, Renault and Nissan.

The ULC project was conceived as a three-way alliance where Bajaj would hold 50 per cent

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http://burnyourfuel.com/tag/joint-venture/






equity with Renault and Nissan accounting for 25 per cent each. Bajaj-Renault-Nissan will

miss its 2011 deadline on its ultra-low-cost car project. Bajaj Auto managing director Rajiv

Bajaj has ordered that the work done so far on the project be scrapped and has demanded

major modifications on design, positioning and other details, according to a person familiar

with the development.

http://www.infibeam.com/Cars/search?make=Nissan



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