its bajaj(2)

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D.Srinivas

Bajaj

The Bajaj Group is amongst the top 10 business houses in India. Its footprintstretches over a wide range of industries, spanning automobiles (two-wheelers andthree-wheelers), home appliances, lighting, iron and steel, insurance, travel andfinance. The group's flagship company, Bajaj Auto, is ranked as the world's fourthlargest two- and three- wheeler manufacturer and the Bajaj brand is well-knownacross several countries in Latin America, Africa, Middle East, South and South EastAsia. Bajaj Auto was founded in 1945.It is India's second largest two wheeler

manufacturer and the world's 4th largest two and threewheeler manufacturer. It isbased in Pune. with plants in Akurdi and Chakan (Pune), Waluj and Pantnagar inUttaranchal Currently It holds a market share of 22% over all two wheeler industryand a phenomenon 71% share in 125- 250 cc category. It has a joint venture withKawasaki and 31.72 % stake in Australian based company KTM Key markets : Bajajauto is Dominant player in Indian market . The best selling market being Punjab,Delhi & NCR, UP , Bangalore and Maharashtra. The company exports its products toSri Lanka, Bangladesh, Philippines, Latin America, Colombia, Peru, Mexico, Africaand the Middle East.

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 inemployment for all sections of the society is a component of its growth andcompetitiveness. It further believes that inclusive growth is a component of growthand development of the country. The Company affirms the recognition that diversityto reflect socially disadvantages sections of the society in the workplace has apositive impact on business. The Company will not practice nor support consciousdiscrimination in any form. The Company does not bias employment away fromapplicants belonging to disadvantaged sections of society if such applicants possesscompetitive skills and job credentials. The Company's selection of business partnersis not based on any considerations other than normal business parameters. In caseof equal business offers, the Company will select a business partner belonging to asocially disadvantaged section of society. This Code of Conduct for AffirmativeAction will be put up on the company web-site to encourage applications fromsocially disadvantaged sections of society. The Company makes all efforts forupskilling and continual training of all its employees in order to enhance theircapabilities and competitive skills. No discrimination of any type will be shown inthis process. The Company may have a partnership programme with educationalinstitution/s to support and aid students from socially disadvantaged sections of society. The Company will maintain records of Affirmative Action. The Company hasnominated Mr. Amrut Kumar Rath, Vice President (HR), to oversee and promote the

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Affirmative Action policies and programmes. He will be accountable to theChairman. The Company will make available its learning and experiences as a goodcorporate citizen in Affirmative Action to other companies desiring to incorporatesuch policies in their own business.

Market segmentation

The division of a market into different homogeneous groups of consumers is knownas market segmentation.

Rather than offer the same marketing mix to vastly different customers, marketsegmentation makes it possible for firms to tailor the marketing mix for specific

target markets, thus better satisfying customer needs. Not all elements of themarketing mix are necessarily changed from one segment to the next. For example,in some cases only the promotional campaigns would differ.

A market segment should be:

• measurable• accessible by communication and distribution channels• different in its response to a marketing mix• durable (not changing too quickly)• substantial enough to be profitable

A market can be segmented by various bases, and industrial markets aresegmented somewhat differently from consumer markets, as described below.

Consumer Market Segmentation

A basis for segmentation is a factor that varies among groups within a market, butthat is consistent within groups. One can identify four primary bases on which tosegment a consumer market:

• Geographic segmentation is based on regional variables such as region,climate, population density, and population growth rate.

• Demographic segmentation is based on variables such as age, gender,ethnicity, education, occupation, income, and family status.

• Psychographic segmentation is based on variables such as values,attitudes, and lifestyle.

• Behavioral segmentation is based on variables such as usage rate andpatterns, price sensitivity, brand loyalty, and benefits sought.

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The optimal bases on which to segment the market depend on the particularsituation and are determined by marketing research, market trends, andmanagerial judgment.

Business Market Segmentation

While many of the consumer market segmentation bases can be applied tobusinesses and organizations, the different nature of business markets often leadsto segmentation on the following bases:

• Geographic segmentation - based on regional variables such ascustomer concentration, regional industrial growth rate, and internationalmacroeconomic factors.

• Customer type - based on factors such as the size of the organization, itsindustry, position in the value chain, etc.

• Buyer behavior - based on factors such as loyalty to suppliers, usagepatterns, and order size.

The following are the advantages of Market Segmentation for a firm:

• Helps in better understanding of the customers’ needs and wants.

• Better targeting and position of the product.

• Encourages two-way communication among the potential buyer and theorganization.

• Maintaining effective relationship with the customers.

• Retaining the existing customers and attracting new ones.

• Improving service delivery standards.

• Reducing cost / expenses on various marketing activities and increasesmarket share; resulting in higher profits.

Market segmentation plan for Bajaj 150 CC Pulsar motorcycle

Market segmentation used by Bajaj to make pulsar a success were as follows

1. Demographic Segmentation

2. Psychographic Segmentation

Key features of Bajaj pulsar were as follows

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Style

• All Black Engine.

• Aerodynamic tank flaps.

• Aggressive masked fairing with wolf eyed headlamps.

• Back-lit LCD digital speedo & tachometer console.

•

Twin slashed L.E.D tail lamp.

Engine

• 4 stoke, DTS-i 150 cc, 14.09 Ps.

• Exhaus TEC (Torque Expansion Chamber) Technology* for the exhausttechnology.

• State of the art feature at the heart of Digital Biking: Digital C.D.I. Unit, Digital Twin Spak Ignition, TRICS III

Alloy Wheels

• High performance 17" alloy wheels.

• Lighter, Stronger and Safer giving superior agility.

Electricals

• 12 V full DC.

• Better starting & uniform illumination at variable speed even at stand still.

Frame

• Beefed up frame with 1320 mm wheelbase.

• More strength and high stability with exceptionally tight turning radius.

These features of the bajaj pulsar 150 dtsi gave it an distinct advantage over itssegment competitors

Suzuki’s 125cc Access

Suzuki launched in its much expected 125cc Variomatic scooter the ‘Access’ onSeptember. Access is the third product from the Suzuki stable in India after Heatand Zeus motorcycles. 125cc Access is the third product from the Suzuki stable inIndia after Heat and Zeus motorcycles. 125cc Access is powered by a 125-cc air-cooled four-stroke engine with automatic transmission. Suzuki’s access featurescontemporary telescopic front suspension and a rust free body. 125cc access alsofeatures central locking system and provision for fitting a spare rear tyre at the

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back similar to the one found in Kinetic honda. Suzuki’s 125cc excess has an uniqueshutter mechanism for a single control point for the entire machine to avoid theft.Suzuki’s 125cc access is available in five colours – red, blue, black, grey and silver.125cc Access will hit the stores by the first week of next October. Suzuki willannounce the price after a pan-India roll out within two weeks time. According toSuzuki,125cc access scooter will give a mileage/fuel efficiency of 65kpl.

Booming scooter segment:

Though Indian motorcycle industry fell by almost 14.4 percent in the April-Augustperiod from a year ago. Scooters is witnessing a robust growth, it rose by 19percent during the same period. On an average 40000 scooters are sold everymonth in india. TVS scooty plus, Honda Activa, Hero Honda pleasure and Bajajkristal are prominent players in this scooter segment. Recently, TVS unveiled anelectric variant of scooty. Yamaha is mulling seriously to foray into the scootersegment. TVS also plans a new scooter next year.

In August 2007, Kinetic Sym introduced India’s first 125cc scooter flyte. Suzuki’saccess will compete with the flyte. The flyte is priced around Rs37000. Suzuki’s125cc access is expected to be priced on a similar front.

There seems to be a parallel development in the scooter and motorcycle segmentsof the two-wheeler market in the country.

Even as there is a step-up in the engine capacity of bikes in the entry-levelmotorcycle segment from the currently popular 100cc to the next upgrade, namely,the 125cc, there seems to be a similar shift in preference in the scooter segmenttoo.

The Honda Activa currently dominates the scooter market in India. Together withthe Dio, a differently styled version of essentially the same scooter, HondaMotorcycle and Scooter India (HMSI) controls over 58 per cent of the scooter marketin the 75cc to 125cc category. But while Honda has a stranglehold over the 100cccategory, with these two scooters, its experience with the Eterno, a 150cc, metal-bodied, geared scooter has been pretty ordinary.

Of course, it is a fact that the metal-bodied, geared scooter as a segment is facing akind of extinction situation. But it is also a fact that the absence of Honda in the100cc to 150cc segment has been a reason why the competition is quicklyattempting to nudge into it. All of the new scooters in this emerging segment havetheir own strong points and compelling value and should be able to stand up and be

noticed.

But the brand equity that Honda has built itself with the Activa has made itextremely difficult for other two-wheeler makers to break into the buyer’s mindspace in this segment, prompting them to look at the 125cc category.

And so it is interesting to note that Suzuki has finally taken its first step into thescooter segment with the new Access 125. This is Suzuki’s maiden attempt at

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entering the scooter segment, including the time it was present in the Indian marketthrough its joint venture with TVS.

In keeping with its calculated and conservative approach to the market here, Suzukihas chosen to mark its entry into the scooter segment with Access 125, a simple,but well-designed and well-finished two-wheeler. The side profile of the Access is

very familiar and almost falls into a relatively predictable design trend that manygearless scooters currently adopt.

Unique features

At a glance, the Access 125 is still attractive and has a number of features that willbe identified as being unique. But put together, there is no evident attempt atbuilding an image of novelty for the scooter. But again that can still be good enoughto attract a number of buyers in this segment. After all, the even more simplisticActiva has managed to corner more than half the buyers in the category.

Considerable work has been put into keeping the Access’ overall quality levels high. The quality of panel plastic, the paint job, panel integration, quality of switches andelectricals, etc., are all as good as the best among the competition.

Comparing Features of 100cc segment

Model

Hero

Honda

Pleasure

Honda

Activa

Honda

Aviator

Suzuki

Access

Kinetic

Flyte

Bajaj

Kristal

TVS

Scooty

Pep+

TVS

Scooty

Streak

Multireflector Headlamp Yes Yes Yes Yes Yes Yes NA NA

Puncture Resistant (Tuff up)tube

Yes Yes Yes No No No No No

Storage Capacity 15 lt 15 lt 20 lt 20 lt 22 lt 22 lt 12 lt 12 lt

Front Fueling system No No No No Yes Yes No

No (butseat

need

not be

opened)

Central Control/Lock No No No No Yes Yes No No

Mobile Charging No No No No Yes No No Yes

Disc Brake option No No Yes No No No No No

Front Telescopic suspension No No Yes Yes Yes No No No

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The above comparison chart clearly shows Honda, Hero Honda and Suzuki as manufacturer who

concentrates on core product and no extra features. whereas, TVS, Bajaj and Kinetic wants to

add features which differentiate itself from other products in the market with features like centrallock/control system, anti theft system, mobile charging etc.

Market economics

The Real market Picture

During the five past years, the Indian motorcycles market has seen some excellentgrowth rates for both value and volume. Even the Chinese market has exhibitedweaker growth rates than the Indian market. Some deceleration of growth isforecast, but India will remain a dynamic market for the next five years.

The Indian motorcycles market generated total revenues of $3.1 billion in 2005, thisrepresenting a compound annual growth rate (CAGR) of 15.8% for the five-yearperiod spanning 2001-2005. In comparison, the Japanese and Chinese markets grewwith CAGRs of 2% and 10.2% over the same period, to reach respective values of $1.5 billion and $8.1 billion in 2005.

The market consumption volumes increased with a CAGR of 13.4% between 2001-2005, to reach a total of 7 million units in 2005. The market's volume is expected torise to 12.5 million units by the end of 2010, this representing a CAGR of 12.2% forthe 2005-2010 period.Motorcycles sales proved the most attractive for the Taiwanese motorcycles market

in 2005, generating total sales of 5.8 million units, equivalent to 82.7% of themarket's overall volume. In comparison, sales of mopeds generated sales of 1.2million units in 2005, equating to 17.2% of the market's aggregate volume.

The performance of the market is forecast to accelerate, with an anticipated CAGRof 12.5% for the five-year period 2005-2010 expected to drive the market to a valueof $5.6 billion by the end of 2010. Comparatively, the Japanese and Chinesemarkets will grow with CAGRs of 3.5% and 16.9% respectively over the sameperiod, to reach respective values of $1.7 billion and $17.7 billion in 2010.

Growth potentials

The Indian motorcycles market grew by 8.9% in 2005 to reach a value of $3.1billion.

The compound annual growth rate of the market in the period 2001-2005 was15.8%.

Table 1: India Motorcycles Market Value: $ billion, 2001-2005 Year $ billion INR billion % Growth2001 1.7 77.0

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2002 2.1 93.9 21.90%2003 2.5 110.8 18.00%2004 2.9 127.0 14.70%2005 3.1 138.3 8.90%CAGR, 2001-2005: 15.8%

Market segmentation

Hero Honda Motors Ltd. leads the Indian motorcycles market with a share of 42.8%.In comparison, Bajaj Auto Ltd. generates 28% of the market share.

Table 5: India Motorcycles Market Share: % Share, by Volume, 2005Company % ShareHero Honda Motors Ltd. 42.80%Bajaj Auto Ltd. 28.00%

Yamaha 5.00%Other 24.20%

Total 100.0%

COMPETITIVE LANDSCAPE

Hero Honda continues to maintain its position as the lead manufacturer of motorcycletransport in India. In the fiscal year ended March 2006, the company continued topost double-digit growth figures of 14% bringing the companies net profit to $220.2million.

However, the company has identified three risk factors that could influence thegrowthof the company moving forward: slowing growth in the premium and deluxe sectors;

increased competition from countries such as China and the rising cost of steel andaluminum.

LEADING COMPANIES

Hero Honda Motors Limited

Hero Honda Motors is a manufacturer and marketer of motorcycles and spare parts. The company is a joint venture between Hero Group, India and Honda MotorsCompany of Japan. Hero Honda is headquartered in New Delhi, India.In the 2005 fiscal year, Hero Honda generated revenues of $8,596.8 million. Thecompany made a net profit of $810.4 million in the 2005 fiscal year.

Bajaj Auto Limited

Bajaj Auto is a manufacturer and marketer of a wide range of two and threewheeledvehicles. The company also trades auto spare parts and is a subsidiary of the BajajGroup. Bajaj Auto is headquartered in Pune, India.

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For the fiscal year ended March 2006, the company generated revenues of $1,937.8million, an increase of 30.7% over fiscal 2005. Net profits were recorded at $254.6million, an increase of 46.8% over the previous year.

Yamaha Motor Co., Ltd.

Yamaha Motor manufactures a large variety of products. It is famed for itsMotorcycles, boats, snowmobiles, jet skis and generators. Yamaha Motor providesland sport and sea sport vehicles as well as common use and industrial useproducts.It operates many plants in countries around the world, through its subsidiaries andaffiliates and is headquartered in Shizuoka, Japan.

For the fiscal year ended December 2005, the company generated revenues of $12.49 billion, an increase of 35.9% on the previous year. The company saw a netincome of $581.4 million during fiscal 2005, an increase of 67.8% on fiscal 2004.

There is a lot of scope for Bajaj auto hence the market is really very open to their

125 cc 150 cc segment

Bajaj Auto is in the process of setting up a chain of retail stores across thecountry exclusively for high-end, performance bikes. These stores are called “BajajProbiking". Fifty two such stores have been opened across the India. Catering todemand in this sector requires a strong and effective distribution network asconsumers are more demanding and expect delivery on time. Early delivery is acause of delight for customers. With such vast global and Indian rural presence,designing an efficient distribution system becomes a complex task even for a

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company like Bajaj Auto. Lot of time and effort goes into designing a strategy basedefficient distribution system.

Product Segmentation

The company classifies motorcycles into three segments, based onconsumer categories and approximate price points. These are:

Entry Segment: These are typically 100 cc motorcycles at a price point in theneighbourhood of Rs.35000. Bajaj Auto has a presence in this segment through thePlatina. Here, Bajaj Auto has been a major player and despite an overall market de-growth, it accounted for 34% of this segment in India in 2008-09.

Executive segment: This largely comprises 100 cc to 135 cc motorcycles, pricedbetween Rs.40000 to Rs.50000. Bajaj Auto has two brands in this segment, namelyXCD and Discover.

These are sleek, high performance bikes with price points in excess of Rs.50000. They are present here with their flagship brand, the Pulsar and cruiser,the Avenger. They dominate this space with a domestic market share of more than47%.

Key competitors (3 wheeler)

Bajaj manufactures commercial vehicles for passenger carrier as well as goodscarrier other players in the three-wheeler segment in India are Mahindra andMahindra , Piaggio and atul auto. Bajaj is facing tough competition by aggressively

launched Mahindra gio

Organization Structure

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Supplier Detail

Key suppliers:

Bajaj auto has approximately 198 suppliers for their raw materials.

Some of the key suppliers are:-

JBM - FramesMRF & Dunlop – tiresMinda - locks & ignition systemReinder – headlamps & lightsEndurance – brakes, clutch & Cast wheelVarroc – Plastic parts & Digital MeterMax auto components – ignition system and switchesSilco cable – wires and cablesMakino industry – Brake shoes . Brake lining, clutch center

Inventory policy-

Bajaj auto maintains seven days inventory . Demand Estimations were basedon Panel Regression, which takes into account both time series and cross sectionvariation in data .All the Mediators are connected with each other through IT linkageto know exact status of delivery of goods

With operations spanning to such vast geographies, managing a supplychain globally becomes more and more complex. In countries where Bajaj perceives

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a strong market potential, they establish a tie up with one major industrialestablishment eager to invest in the project. This investment may include setting upstrategic manufacturing or assembly units, apart from a well-established nation-wide network for marketing, distribution and after sales services. These investorswho form alliances with Bajaj Auto are termed as “Business Partners” . Bajaj Autooffers a number of services to its business partners.

They include:

Training in sales, service and spare parts management based on the Bajajdistribution system

Active support for setting up manufacturing facilities overseas including transfer of technical know-how

Assistance in setting up an assembly plant for assembly of vehicles from completeknocked down (CKD) kits

Selecting of machinery and equipment and training of technical personnel, all in aphased manner as required by the regulations in the recipient country

Active support in setting nation-wide dealer network, also involving identificationand recommending suitable partner who would assist the distributor in Businessgrowth

Distribution Detail

For distribution bajaj auto uses mix of depots and Cnf agents. This iscompletely dependent on the distance of manufacturing location from dealerpoint .For example due to extensive distance from manufacturing plant from westBengal to north-east India ,there exist a depot in Khadakpur with capacity of housing 800vehicles. There are similar depots in Punjab , Rajasthan and southernIndia.

Dealers

Like mentioned above, the company has a network of 498 dealers and over1,500 authorised service centres and 162 exclusive three-wheeler dealers spreadacross the country. Around 1,400 rural outlets have been created in towns with

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population of 25,000 and below. The current dealer network is servicing theseoutlets. Dealers can be classified under 3 heads. They are as follows:

COCO- These are Company Owned & Company Operated showrooms. These concepts existonly for Pro-Biking showrooms. Here Bajaj Auto has tried showcasing their muscle

power in high end biking segment. The concept has evolved very fast and now thereare 52 Pro-Biking showrooms in the country. The company itself does not take anyorder from the customer in these showrooms. The giant dealer of the region who isacting as a logistics partner for the pro-biking concept takes the order on behalf of the company and fulfils the customer requirement.

CODO- These are Company Owned & Dealer Operated showrooms. In case of this concept,showrooms are owned by the company but the operations in the showroom aremanaged by the dealer. This is generally the case where Bajaj wants to provide the

dealer financial benefits considering the high working capital requirement of thecompany.

DODO- These are Dealer Owned & Dealer Operated. These dealers are fewer in numberbecause they are generally the giant dealers who are the financial muscle for thecompany. In our talks, the management indicated that the top management wantsto do away with this concept. The reason behind this is that the bargaining powerincreases in the hands of the dealer, which puts the company in an knotty situation.

National Level Partnerships

There is an exisisting generic channel which is used for segmentation of thiscategory of two-wheelers and three wheelers.

Transport & Logistics

This function of distribution is not owned by the company in any form. This isoutsourced in toto to the third party vendors. The third party here is TransportCorporation of India (TCI) and a few other private vendors. The fleet to betransported is custom-designed for Bajaj Auto by the vendor.

Key Facts There are twenty vendors all across India

OSL

Jamuna Transport

Sumit Transport

A Transit Insurance Compliance Letter(TICL) is signed between the two parties

The local level sub-dealer sometimes gets to decide the last mile logistics, as he can decide to pick up the vehicles himself or have it transported to him

Logistics of the vendor is decided by the company

Freight charge is built-in in the product price

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Bajaj selects those suppliers who provides majority of the required rawmaterials together. The company believes in situation so if any suppliers do notkeep their requirement so at that time bajaj left the contract.

Relation with the supplier firm :B.ajaj auto lt believes in good relationship with its suppliers and customers.

The suppliers who supply raw material to the company, Bajaj auto pay themregularly. If any when advanced payment required Bajaj also pay advance for bulkyconsumption. During annual day of the company, Philips rewarded those supplierswho contracted with company for whole year and survive company without anyproblems.

Services provided by Bajaj Auto to the dealer

Workshop Training

In a month:

30-40 Mechanics can be trained per dealer

15-20 Sales personnel can be trained per dealer

New Product Launch

Information is percolated around a month before the product is to be launched

The date of launch can be rescheduled in case the current stocks of the dealer are not getting cleared.

Promotional Activities

The cost of sending the staff to the Pune branch for training is borne by the dealer.

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Trail balance of ABC Auto as on 30.3.2009

Particular

Debit(amount)

RS(000)

Credit(amount)

RS(000)

Bank loan 12,000

Cash 11700

Capital 13,000

Rates 1,880

Purchases 12,400Trade creditors 11200Sales 14600

Sundry creditors 1,620

Debtors 12,000

Banks loan interest 1,400

Other expenses 11,020

Vehicles 2,020

TOTALS 52420 52420

its bajaj(2)

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