Bajaj Auto Limited -Case Study Analysis
Managerial Economics Case Study- Bajaj Auto Limited
Introduction
Bajaj Auto Limited was established in 1945 as a trading company, obtaining its license in 1959. •India’s one of the largest two-wheeler manufacturers and dominant players until 1990. •The two wheeler industry grew by 11.6%, being unit production increasing from 5.05 million to 5.64 million.
•
Identification of Problem.
The market share of Bajaj declined from 49.3% in 1994 to 38.9% in 1999, though the industry’s growth rate increased.
Due to increasing levels of income, people started opting for motorcycle instead of scooters.
Identification of concepts
Optimal input combination to maximise the output and minimise costA firm needs an optimal combination of inputs to minimize the cost of production Returns to scale- Refers to the degree by which output changes as a result of a given change in the quantity of all inputs used in production. If quantity of all inputs is increased by a given proportion, we have constant returns to scale, increasing returns to scale and decreasing returns to scale.
Application of the concept
Constant returns
Increasing returns to scale
Measures adopted to overcome the problem- Small is Better
Bajaj Auto ltd adopted the strategy to reduce its headcount first in 1998 and then in 2001 by more than 3,000 persons. Offered VRS for the staff to compact its employee strength by 9,384, resulting in the reduction of 70.6 Cr p.a. in its wage bill. Also R&D department focused on upgrading current products, developing new scooters, and cost reduction in entry-level segment.
Employee-Output Statistics
Year 1997 1998 1999 2000 2001 2002 2003 2004 No. of employees 21,273 18,589 18,585 17,215 13,819 13,482 12,348 11,531 Output/Employee/Year 67.7 72.9 74.3 83.2 87.8 100.6 118.1 131.5
If strategy was a Success ?
•By doing this, company’s output/employee/year showed an increase of almost 50% in 7 years. •The productivity also
Introduction
Bajaj Auto Limited was established in 1945 as a trading company, obtaining its license in 1959. •India’s one of the largest two-wheeler manufacturers and dominant players until 1990. •The two wheeler industry grew by 11.6%, being unit production increasing from 5.05 million to 5.64 million.
•
Identification of Problem.
The market share of Bajaj declined from 49.3% in 1994 to 38.9% in 1999, though the industry’s growth rate increased.
Due to increasing levels of income, people started opting for motorcycle instead of scooters.
Identification of concepts
Optimal input combination to maximise the output and minimise costA firm needs an optimal combination of inputs to minimize the cost of production Returns to scale- Refers to the degree by which output changes as a result of a given change in the quantity of all inputs used in production. If quantity of all inputs is increased by a given proportion, we have constant returns to scale, increasing returns to scale and decreasing returns to scale.
Application of the concept
Constant returns
Increasing returns to scale
Measures adopted to overcome the problem- Small is Better
Bajaj Auto ltd adopted the strategy to reduce its headcount first in 1998 and then in 2001 by more than 3,000 persons. Offered VRS for the staff to compact its employee strength by 9,384, resulting in the reduction of 70.6 Cr p.a. in its wage bill. Also R&D department focused on upgrading current products, developing new scooters, and cost reduction in entry-level segment.
Employee-Output Statistics
Year 1997 1998 1999 2000 2001 2002 2003 2004 No. of employees 21,273 18,589 18,585 17,215 13,819 13,482 12,348 11,531 Output/Employee/Year 67.7 72.9 74.3 83.2 87.8 100.6 118.1 131.5
If strategy was a Success ?
•By doing this, company’s output/employee/year showed an increase of almost 50% in 7 years. •The productivity also