Bajaj Auto Ltd.

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Question 1

What challenges confronted BAL in 1993?

1.Economic forces

By the 1990s, the Indian economy was undergoing structural change, and imports were largely unregulated. Since 1990, consumers had felt the pinch of recession, inflation had averaged 13%, interest rates had shot up, and consumer purchasing power had dropped considerably. In 1993, demand for two-wheelers had declined substantially, the Indian two-wheeler vehicle industry suffered from chronic overcapacity due to the economic recession and the increase in the range and volume of consumer goods available to Indian consumer. This had given a big impact to BAL sales.

2.Technological forces

In the perception of the Indian consumers that Japanese products as being higher-tech, more modern, and better finished than domestic products. Thus, BAL also lacked design capability and the ability to translate new products from concept to commercialization as fast as its Japanese competitors. BAL’s main constraints were a lack of sufficient skilled R&D personnel and the slow response of suppliers. Furthermore, dealers were complaint that BAL had not kept up with competitor product introductions and that recent BAL new product launches had experienced number technical problems.

3.Sociocultural forces

Besides, there are problems that faced by BAL when BAL need to do advertising and promotion. The existence of 15 different languages in India meant that the same commercial could not always be used throughout India.

4.Competitors

TVS

Manufactured mopeds and motorcycles and had an equity collaboration with Suzuki for motorcycles.

Escorts

Manufactured motorcycles in a technical collaboration with Yamaha.

Kinetic

Manufactured both scooters and mopeds and had an equity collaboration with Honda for scooters.

Hero

Manufactured motorcycles and mopeds and had an equity collaboration with Honda for motorcycles.

LML

Manufactured scooters in collaboration with Piaggio.

Which were of its own making?

The one which is its own making is that BAL lacked design capability and the ability to translate new products from concept to commercialization as fast as its Japanese competitors. There was research shows that BAL’s average cycle time for a new model was four to five years, compared with two o three years for Japanese manufacturers. On the other hand, BAL also lack of sufficient skilled R&D personnel and the slow response of suppliers. Moreover, the new product that launched by BAL had experienced a number of technical problem. These were the problem that at its own making. In a nutshell, BAL should solve these problems in stead of only keeping everything cost competitive only.

Question 2

Could BAL rely on the domestic market to achieve its corporate goals or should it expand foreign operations?

In 1993, the marketing department’s objectives were to increase annual sales to 1 million units (retaining at least a 50% domestic market share) and achieve share leadership in all three two-wheeler subcategories as well as in the three-wheeler segment. BAL’s product strategy was to provide consumers with a full line of competitively priced two- and three-wheeler products. The objectives governing product development were to protect market share by, providing consumers with what they wanted, matching competitor product features by constantly improving existing products, and periodically introducing new products. Besides, BAL’s products were renowned for being rugged, reliable, and fuel efficient. Perceived as reasonably priced, BAL products were also known for their low maintenance cost, good spare parts availability, and good resale value.

By using Porters Diamond framework, BAL will be able to identify whether to rely on the domestic market or expand foreign operations to achieve BAL’s corporate goals. First of all, let’s look at the Factor condition in Diamond framework....
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