Bajaj Auto Ltd
BAJAJ CASE STUDY
1. What challenges confronted BAL and which were of its own making?
In 1980s, the government’s impact was the most challenging factor confronting BAL. It witnessed an increase in both foreign and domestic competitors because of the Indian government’s permission of foreign technology and local manufacturing capacity expansion. Accordingly, Japanese products were more preferred than domestic brands due to its durability and eye-catching design. Apart from Yamaha, Suzuki, and Piaggio, Honda who took out the major market share of BAL scooter and motorcycle segments was its fiercest rival.
Since 1990, due to the economic downturn, two-wheelers vehicles were no longer the first prioritized consumer products but TVs, VCRs, and washing machines. Thus, the demand of BAL’s two-wheelers significantly decreased.
There were two main internal challenges that BAL had to face. Firstly, there had been insufficient labor force in R&D field resulting in the poor product design compared to Japanese products and therefore, creating the larger gap with Honda. Lastly, no preferential credit was given to its dealers on working capital leading to the profitability pressure towards its dealers and the difficulty for BAL in building a wide dealer network.
2. How was BAL performing?
Chart 1: Sales, Operating Expenditures and Operating Profit from 1986 to 1996E
Table 1: Changes of volumes of Sales, Operating Expenditures and Operating Profit through periods | 1986-1988 | 1988-1990 | 1990-1992 | 1992-1994E | 1994-1996E | Sales | 795 | 5098 | 2013 | 5283 | 5971 | Operating expenditures | 1147 | 4204 | 2022 | 5090 | 5298 | Operating profit | -352 | 894 | -9 | 193 | 673 |
Table 2: Changes of rates of Operating Profit through periods | 1986-1988 | 1988-1990 | 1990-1992 | 1992-1994E | 1994-1996E | Sales | 18.92% | 102.02% | 19.94% | 43.63% | 34.33% | Operating expenditures | 33.59% | 92.15% | 23.07% | 47.18% | 33.37% | Operating profit |
1. What challenges confronted BAL and which were of its own making?
In 1980s, the government’s impact was the most challenging factor confronting BAL. It witnessed an increase in both foreign and domestic competitors because of the Indian government’s permission of foreign technology and local manufacturing capacity expansion. Accordingly, Japanese products were more preferred than domestic brands due to its durability and eye-catching design. Apart from Yamaha, Suzuki, and Piaggio, Honda who took out the major market share of BAL scooter and motorcycle segments was its fiercest rival.
Since 1990, due to the economic downturn, two-wheelers vehicles were no longer the first prioritized consumer products but TVs, VCRs, and washing machines. Thus, the demand of BAL’s two-wheelers significantly decreased.
There were two main internal challenges that BAL had to face. Firstly, there had been insufficient labor force in R&D field resulting in the poor product design compared to Japanese products and therefore, creating the larger gap with Honda. Lastly, no preferential credit was given to its dealers on working capital leading to the profitability pressure towards its dealers and the difficulty for BAL in building a wide dealer network.
2. How was BAL performing?
Chart 1: Sales, Operating Expenditures and Operating Profit from 1986 to 1996E
Table 1: Changes of volumes of Sales, Operating Expenditures and Operating Profit through periods | 1986-1988 | 1988-1990 | 1990-1992 | 1992-1994E | 1994-1996E | Sales | 795 | 5098 | 2013 | 5283 | 5971 | Operating expenditures | 1147 | 4204 | 2022 | 5090 | 5298 | Operating profit | -352 | 894 | -9 | 193 | 673 |
Table 2: Changes of rates of Operating Profit through periods | 1986-1988 | 1988-1990 | 1990-1992 | 1992-1994E | 1994-1996E | Sales | 18.92% | 102.02% | 19.94% | 43.63% | 34.33% | Operating expenditures | 33.59% | 92.15% | 23.07% | 47.18% | 33.37% | Operating profit |
References: * Quelch, J 1993, ‘Global Expansion Strategies’, course notes for BUSM2412_3994 Marketing Management, RMIT University, Vietnam, viewed 1st July 2010, Blackboard@RMIT. * Haub, C, Sharma, O 2006, Population Bulletin vol. 61, Population Reference Bureau, Washington, DC.