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BAJAJ QUADRICYCLES
ASM ASSIGNMENT 2
SUBMITTED BY GROUP B6
RAHUL THAMPY MADHEV DAS 12035 12086
DECEMBER 7, 2013
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Contents
1. Bajaj Auto Ltd (BAL) -Company Profile ................................................................................... 2 1.1 Two wheeler segment .................................................................................................................. 2 1.2 Three wheeler segment ............................................................................................................... 2 2. 3. 4. Strategic intend of BAL ................................................................................................................ 3 Concept of quadricycles................................................................................................................ 4 Bajaj RE60..................................................................................................................................... 4 4.1 Comparison with Bajaj auto rickshaw...................................................................................... 5 4.2 How Bajaj achieved this trio of benefits ................................................................................... 5 5. Viewpoints ..................................................................................................................................... 6 5.1 Bajaj Auto .................................................................................................................................... 6 5.2 TATA Motors .............................................................................................................................. 6 5.3 TVS Motors ................................................................................................................................. 6 5.4 Piaggio:......................................................................................................................................... 6 5.5 Mahindra & Mahindra............................................................................................................... 7 6. Rationale behind the RE60........................................................................................................... 7 6.1 7. 8. 9. Analysis of Indian three wheeler industry using Porters five force model ..................... 8
SWOT Analysis ........................................................................................................................... 10 Challenges in quadricycles ......................................................................................................... 10 Marketing Plan............................................................................................................................ 11 9.1 SLEPT Analysis ........................................................................................................................ 11 9.2 Marketing Strategies ................................................................................................................ 12
10. 11.
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brands of three wheeler which are Compact, Optima and Maxima with options in In the FY 2012-13 it sold around 480000 three wheelers of which 53% where exported. Bajaj has a market share of 51% making them the market leader. Bajaj Auto sold the most number of vehicles during FY 2012 which sums to 29,395 units against 27,247 units in the same period last year registering a growth of 7.88%. Piaggio also registered a delicate growth of 1.02%. Atul Auto is the most enriched brand in April-May period of 2013, as they seized a 10.27% growth against April-May 2012. Mahindra sales in this segment decreased by 10.19 while the worst hit brand has been TVS where they witnessed their sales went down by a massive 39.29%. Three wheeler passenger segment
Main players in three wheeler segment Players Bajaj Brand/ Product name GC series of goods carriers. (Max diesel, Max CNG) RE600 RE passenger series (2S, 2S CNG, 2S LPG, 4S, 4S CNG, 4S LPG, Diesel, GDI), Mega Max Ape City, Ape Cargo, Ape Xtra Passenger TVS King
Piaggio TVS
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increased the perceived value of the brand by a customer and which in turn helped in defending the supremacy of the brand. The core competency of the company is believed to be in its values of innovation, perfection and speed. The company is innovative in identifying the needs of the customer and delivering quality products at the right time. By doing so, the company has been able to garner a considerable amount of brand loyalty spanning even outside the country. Success of most of the brands of BAL in the market for the last decade can be seen as a testimonial for the same. One of the very important aspects of Bajajs strategy is to defend their brands. The company has been very particular of not diluting its brand. The company believes its brand led strategy to be the reason for being profitable even at the difficult times. BAL boasts of having the highest operating margin in the automobile industry. It has been able to maintain an operating margin of 16.7% in the last FY year even when the overall demand for motorcycles took a considerable dip. It can be inferred from the above discussion that the BAL predominantly belongs to the positioning school. The Brand led strategy of the company can be seen as a consequence of the same. However the influence of other schools of strategy cannot be overlooked. There is lot of influence of the enterprernial and the learning school on the functioning of BAL. The decision of Rajiv Bajaj to leave the scooter business can be seen as entrepreneurial in nature.
3. Concept of quadricycles
The concept of quadriycles was first introduced in Europe. In Europe quadricycles are defined as four wheeled micro cars that are limited in terms of weight, power and speed when compared to a car. Quardicycles are seen as leisure vehicles used off the road rather than on it. There are two categories of quadricycles in Europe: Light quadricycles which are limited to 350 kg and top speed exceeds not more than 45 km/hr. Heavy quadricycles which are limited to 400 kg and maximum power not exceeding 15 KW
In India quadricycle is a concept that is aimed as an alternative to the unsafe three wheeler auto rickshaws. It is not targeted at competing with small cars but the cost of the proposed quadricycles are close to the range of small cars and hence it becomes a direct competition to small car manufacturers. Also, majority of Indian population generally use vehicle for mass transport rather than as a leisure transport.
4. Bajaj RE60
Bajaj Re 60 is basically a quadricycle; quadricycles are low speed light weight four wheelers having an engine at the rear meant for intra-city commuters. The most important point to consider is that even though its a four wheeler it should not be coined as a car. This is not a car, it is for a totally different market, this is what Rajiv Bajaj quoted during the launch of Re-60 at the 2012 auto expo. While the RE60 was originally conceived as an answer to the compact Tata Nano (positioned as worlds cheapest car), Bajaj Auto Ltd. has since made it crystal clear that its new brand is targeted towards the three-wheeler sector and is not intended to compete with Tata Nano. There is logic behind this statement as Bajaj wants the 2
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and 3 wheeler customers in its two largest markets; India and Sri Lanka, to view the RE60 as their next evolution. While Tata targeted first-time car owners, Bajaj is considering process of cannibalization by looking to convert its existing market base of auto-rickshaws into the RE60 market.
The table above stresses the 3 core benefits of re-60 as compared to conventional three wheelers. Higher power Max power obtained for Re 60 is 20Bhp which is about 40 percent more than the power generated by a standard 175 cc powered three-wheeler. Fuel efficiency Bajaj claims that RE60s best mileage so far has been 35+ kmpl and it is fuel efficient because of its limited 450kgs of kerb weight and minimal frictional and transmission losses. Ultra low emissions Bajaj claims that re-60 produces ultra-low emissions of 60gms CO2 per kilometre. For a vehicle that has the looks of a car, the RE60 has the lowest CO2 emissions in the world. Compared to the conventional autos in the market the emission levels of Bajaj re-60 is very low.
The additional benefits of safety (seatbelts, doors) and better travel comfort travel (especially during monsoon seasons) are also claimed by Bajaj.
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5. Viewpoints
The different viewpoints of the auto manufacturers in India would give a better picture of quadricycles:
5.4 Piaggio:
They were the pioneers of quadricycle in Europe and along with TVS proposed quadricycles for India in 2004. As the idea was opposed by Maruti and Bajaj Auto at that time, Piaggio started manufacturing three wheelers for passenger and goods transport.
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Presently, Piaggio is supporting the quardicycles and supports the adoption of EU norms. Unlike other manufacturers, Piaggio would have a head start in designing as they have already launched the quadricycles in Europe. With the quality of the materials used for production and capability of the company, Piaggio can capture a large chunk of the unpopulated market.
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One big problem with other alternative source of energy not working in a country like Indonesia is the fact that the government is not in a position to provide significant subsidy on the greener source of energy in contrary to the situation in developed countries. However the important point here is that with the growth of economy of a country the three wheelers will slowly start becoming obsolete. This scenario discussed above is not an isolated occurrence. The situation is similar in most of the countries that Bajaj export their three wheelers. Srilankan government has already banned the import of 2 stroke engine powered auto rickshaws. In Nepal they have shifted to CNG engine powered auto rickshaws since they have the availability of CNG. The obvious understanding from these examples is that a three wheeler is no more a desired option for a community but rather an option of compulsion. The situation is no different in India. The example of Delhi can be an impelling one in this regard where government regulation on running all the public transport vehicles in CNG was brought about. At the advent of an economically viable greener option for intra city transportation, most of the developing nations and India will be more than happy to adopt the same.
6.1 Analysis of Indian three wheeler industry using Porters five force model
Potential of new entrants into industry- Low
In Passenger vehicle segment Bajaj Auto has sold 223,287 units in FY 2012-13 taking their sales figures up by 26,146 units equated to last FY. Bajaj Auto is the market leader with 51% market share followed by Piaggio and Mahindra & Mahindra with 10% market share. Piaggio continues to be the market leader in goods segment with 52% market share. In this segment Piaggio is the market leader from couple of years followed by Mahindra and Mahindra and Bajaj with 7% market share. Thus it is very evident that the three wheeler industry is dominated by few key players with long history of trust making the entry barrier high. Power of suppliers Low
For critical parts like engine parts and suspension parts, Bajaj three wheelers rely on few selected vendors such as Kharbanda Automotive and Mithani Group. These suppliers are more concentrated on the three wheeler industry to which it sells, implying their chance of supplying to other industries are minimal. Thus making the bargaining power of suppliers low. Power of customers - High
The bargaining power of the buyers are high. There are a variety of products available to customers to choose from players like Piaggio, Mahindra & Mahindra etc. The customer is treated as a king.
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Indian three wheelers market segment is growing as there is an increased demand for intra city transport. But when we consider Indian three wheeler transportation customers use three wheeler more of compulsion than comfort. There is always threat of alternate mode of transport. Customers chance of welcoming new modes of transport which are sustainable are high. Also changing government regulations on emissions and other regulatory policies can be a threat for the three wheelers. There are also other substitutions for three wheelers like Tata Magic, it is a passenger version of Tata Ace mini truck which allows customers a choice of four wheeler over a three wheeler for intra city transport. Competition in the industry - High
The industry saw a slight decline in 2011 which can be recognised by government policies such as cap on permits and high interest rates. However the market has been performing pretty well thereafter as a result of climbing population, growing commercialization, increasing commercial activities, etc. which all are contributing to the increased demand for intra city transportation. The passenger three wheeler segment leads the market as the need for passenger commutation is greater than the need for goods carriage within a city. The modifications in FDI policies and flourishing retail sector in the country are driving the growth for commercial three wheelers. Bajaj Auto sold the most number of vehicles during FY 2012 which sums to 29,395 units against 27,247 units in the same period last year registering a growth of 7.88%. Piaggio also registered a delicate growth of 1.02%. Atul Auto is the most enriched brand in AprilMay period of 2013, as they seized a 10.27% growth against April-May 2012. Mahindra sales in this segment decreased by 10.19 while the worst hit brand has been TVS where they witnessed their sales went down by a massive 39.29%. Thus we can see that all the players in the three wheeler industry compete each other for their survival. Porters five force analysis leads to an opportunity of an alternative. The increasing importance of sustainability and other emission regulations opens a new opportunity which the companies can look for.
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7. SWOT Analysis
STRENGTHS
Brand image Robust distribution network Global presence (especially in emerging markets) First mover advantage
WEAKNESS
Lack of labour skills Lack of prior experience in marketing similar product
SWOT Analysis
OPPORTUNITIES
Desire for a greener and safe alternative for three wheelers Growing economy of India inin quadricycle Challenges Opportunity export market
THREATS
Auto drivers mentality towards change Future competition from Tata and m&m Lobbying by major auto manufacturers Government regulations
8. Challenges in quadricycles
The list of negative flexible materials include rexin, cloth, and plastic. The government expects quadricycles to deliver better safety than three wheeler auto rickshaw. Quadricycles are new to the vehicle segment. Lack of proper norms are a major concern. The government has to come up with stringent norms which restrict the amount of carbon dioxide emissions. The number of passengers including the driver that the vehicle can accommodate is four in case of a passenger vehicle. The maximum load allowed is 450 kg. In case of goods vehicles under this category must have seating capacity for 2 including the driver. The maximum load allowed is 550 kg. In India majority of the population use vehicles for mass transportation but the quadricycle cars are meant to be used as a leisure vehicle and not as a mass transport vehicle. The acceptability of the vehicle by the middle segment to which it is mainly targeted has to be understood.
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The opposition faced from the competition is severe as none of them has the facility to build quadricycles. Competitors like Tata, TVS and Maruti Suzuki has strongly opposed the concept of quadricycles. Their point of argument is regarding the safety and emission norms. In a country like India where the number of reported accidents are higher (around 1.4 lakh), introduction of an unsafe vehicle can exponentially increase the numbers. All the opposing players have asked the Government to not to sanction the proposal until all the players build the capacity to manufacture.
9. Marketing Plan
9.1 SLEPT Analysis
Social: The quadricycles are targeted at three wheeler owners. It is introduced as an up gradation to a three wheeler. The customers/three wheeler owners would get the status of a four wheeler owner. Quadricycles are much safer and stable than a three wheeler which offers better comfort and transport experience for the passengers. RE60 costs a little more than a three wheeler which makes it affordable for the target customers Legal: As mentioned earlier there was substantial opposition for the Bajaj RE60 from the major manufacturers like Tata motors and Maruti. Government body has given the required sanctions to launch RE60 in India under the following norms: RE60 can only be used as a commercial vehicle Only a person with commercial license can drive the vehicle The quadricycles will be amended as a new category in the central motor vehicle rules The RE 60 should have a Q symbol on it to differentiate it from the other vehicles The quadricycles will comply to EU norms for quadricycles and will be upgraded in the time span of 6 months in the case the same being revised
The government regulation on the RE60 is to the interest of BAL, however Tata motors and Maruti are also reasonably happy with regulation since RE60 is confined to commercial use. It is being said that the government process regarding the amendments will get done in period two months from now. Bajaj seeing the commercialization of RE60 in the coming year is the final testing stage for the vehicle. Economic & Environment: RE60 is priced slightly higher to a three wheeler which makes it affordable to the target customers. The maintenance cost of RE60 is low when compared to a car. Carbon dioxide emission from a car is around 120 g whereas the emissions from a quadricycle is around 60 g thus making quadricycles environment friendly. Political Various political factors affected the delaying of the launch of quadricycle in India. Lobbying by car manufacturer majors like Tata, TVS and Maruti has delayed the launch of quadricycle.
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The main reason for their opposition being safety and emission norms. Also the concept was initially opposed by Bajaj and their re-introduction at a later stage was actually a lost opportunity for Tata and TVS. Since government policies for quadricycles were absent, the policies were actually dependent on the viewpoints of the auto makers. Technological RE60 was initially a project which was carried out by Bajaj in association with Nissan and Renault. The reason for the association being the technical incompetency of Bajaj to manufacture the quadricycle. However, when the product was almost ready to be launched Nissan and Renault backed off citing that RE 60 was not the right product that they envisioned. The collaboration continued till the final stages of product development and the withdrawal of the parties would question the technical expertise of BAL.
Marketing Mix
Product RE-60 is a replacement for three wheel autos and it has features like better fuel efficiency, power, safety and riding comfort compared to three wheelers. The strong brand name of Bajaj in the Indian market augurs very well for Re 60. Design Design is sleek and attractive and it is small in size which is best suited for Indian markets. Variants
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Petrol, CNG and LPG. Services The wide distribution network of Bajaj and its service outlets promises to provide the best in class services to customers.
Price RE60 is believed to be priced between three wheel auto rickshaws and Tata Nano (worlds cheapest car). Therefore the price is very much affordable for new buyers and also replacement buyers. Place High penetration in urban and rural areas with the help of the large presence of dealerships and showrooms of Bajaj. Promotion The biggest challenge is to change the mind-set of auto users to move from auto rickshaws to quadricycles. For evoking such a change the user should get the opportunity to drive the vehicle which will remove any negative feelings/perception that they may have towards the vehicle. Test driving should be done at all Bajaj outlets and authorized service centres Attractive exchange and finance schemes should be introduced by Bajaj to tap the auto rickshaw market. Financial risk is one of the most common risks perceived by customer and if Bajaj is able to lower that then it will be a huge factor to drive sales for Re-60.
Strategy:
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It is the plan devised to maintain and build competitive advantage over the competition. Bajaj Auto usually uses differentiation strategies. Rajiv Bajaj, the CEO of Bajaj Auto has come up with the concept of quadricycles to differentiate itself from the competitors in the auto industry. Bajaj Auto is the largest manufacturer and exporter of three wheelers in India. Rajiv Bajaj took a precautionary defensive strategy because he thought of a possibility of a potential competitor putting a fourth wheel to his three wheeler would mean a huge loss to the company. Hence he came up with this defensive strategy even though it would cannibalise the current products (Bajaj Auto three wheelers). Structure: It is the way the organization is structured and who reports to whom. In 2007, Bajaj Auto underwent a focussed organizational restructuring which helped to strengthen the existing business roles and responsibilities to ensure greater empowerment and effective management. The five pillars of this structure were R&D Engineering Two wheeler business unit Commercial vehicles business unit International business unit
These pillars were supported by functions of finance, MIS, Human Resource, Business development and Commercial. The division into these pillars helps Bajaj Auto to take quick decisions. Systems: It is the daily activities and procedures that the staff members engage in to get the job done. The company believes in building a distinctly ahead organization by developing competent and engaged employees. Bajaj Auto has put in place a learning environment for the employees. Some initiatives taken by the company are Individual owned learning- wherein the employees develop their own learning plan which are based on mutually identified competency gaps in present and aspired job in their career path User friendly learning management software- which are instructor led training programs, e- learning modules and informal learning through communities Idea management and knowledge sharing- employees are encouraged to explore the unknown and in the process create value. Kaizen idea management and various knowledge sharing forums are facilitated
Shared Values: These are superordinate goals which are core values of the company that are evidenced in the corporate culture and general work ethics. Innovation is the core value of BAL. They believe that customer satisfaction is the key element of success. In order to satisfy the customers, they should be provided with the best quality products at affordable prices. BAL uses latest manufacturing technologies like robotics and automation to build quality in the products.
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It is the style of the leadership adopted. Jamnalal Bajaj, the founder of the Bajaj group was a Gandhi disciple. Integrity, dedication, resourcefulness and determination to succeed are the main characteristics of the group today. These qualities are often tracked back to its inception which are characteristics of that period of relentless devotion to a common cause. Rahul Bajaj is the present chairman of the group under whose leadership the company has grown in revenues from Rs 72 million to Rs 120 billion. Rajiv Bajaj has brought about an entrepreneurial spirit to the company. He is also well known for his abilities to make good judgements and quick decision making. Staff: Staff includes the employees and their general capabilities. Bajaj recruits the best engineers from premium institutes like NITs and IITs. Lateral hiring is also done to bring together individuals from various organization cultures which helps in pooling different perspectives to a problem. Looking at the present situation there are no gaps in the required competencies. The R&D department, Engineering department and other structural units are doing well. Employees are well kept engaged and facilities for recreational activities like basketball, table tennis, swimming, trekking etc. are provided to help the staff to maintain a healthy work life balance. The organic growth provides numerous opportunities to the employees to climb the ladder of authority and take responsibility Skills: The actual skills and competencies of the employees working for the company constitutes the skill part of the 7S. Bajaj is known for its technological innovation. Bajaj houses brilliant engineering minds who consistently conceptualize new ideas and comes forth with breakthrough technologies. Bajaj possess innovative patents like the Bajaj DTS engine which was a breakthrough product of the past decade. The new RE60 which is an alternative to the three wheeler is also an excellent example of the engineering and R&D skills of the company. The organization culture which provide the employees with high degree of autonomy in their day to day decisions empower and motivate them in their performance.
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11. Conclusion
The study conducted has shown that it was a reasonable decision by BAL to launch RE60. The timing is also believed to be apt considering the growing issues of pollution and need for better technology. However, the roll out of RE60 is not expected go very smoothly for BAL. It is expected that the company will have to overcome significant hurdles to be successful in this venture. As indicated earlier in the report, implementation of an effective marketing campaign focusing on core benefits of the product will be crucial for the success of BAL in this endeavour. It was recently told by Rajiv Bajaj that he would not wait longer if the launch of RE60 further delays in India. It has been reported of him saying that there is promising potential for RE60 in the countries like Indonesia and Srilanka. Further on it was also told that the government in these countries are interested in the concept of RE60. The reasons behind the same have been discussed above in the report. Opportunity in the European countries can also not be ruled out. Considering the demographics and the economic scenario in European nations, RE60 with may be a little modification can be a prospective last mile private transport vehicle. There are a lot older people in Europe who might be interested in having a cheap mode of private transport which is easy to use. However it does go without saying that it would require some significant changes in the value proposition of RE60 as of now. Italy, France and Spain can be some of the prospective European countries in this regard.
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