From Next Week onwards the Monday class is being shifted to Thursday 11.20 am to 12.20 pm for the rest of the term.

Cases for Next WeekSalesSoft Case: on Tuesday Group 9 (Main Group) Group 13 Case Facilitator Group for class discussion.

Geda Solar Cookers Case: on Wednesday:Group 6 (Main Group)Group 8 Facilitator Group

TERM PROJECT

Select any industry and Product Category from the category groupings given in the project guidelines.

Examine

Consumer Behaviour (5 marks)

Impact of Environmental Factors (10 Marks)

Competitive Activity within the industry with regard to any company you have selected (Market leader, Follower or Nicher), and company response to the competitive activity in terms of its Marketing Mix elements.

Reports are to be one and a half spacing, stapled, without plastic covers or plastic spines.

This is a case on:

•Application of Environmental Factors,

•Different Orientations to the Market,

•Application of the Marketing Mix Strategy

•Application of Marketing Strategy Alternatives. (Market Penetration, Market Expansion, Product Development, Diversification)

BAJAJ AUTO CASE

I . DOMESTIC MARKET 2. EXPORT MARKET

Competitors

Marketingintermediaries

PublicsSuppliers

Factors Influencing Company Factors Influencing Company Marketing Marketing StrategyStrategy

Mar

ketin

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info

rmat

ion

syst

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Marketing

planningsystem

Marketing

organization

system Mar

ketin

g

orga

niza

tion

and

impl

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tatio

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Product

Promotion

Place PriceTARGETCUSTOMERS

DemographicDemographiceconomiceconomic

environmentenvironment

Social/Social/CulturalCultural

environmentenvironment

Technical/Technical/physicalphysical

environmentenvironment

Political/Political/LegalLegal

environmentenvironment

CASE ANALYSIS

BAJAJ AUTO Ltd.

Environmental Factors/Challenges that the company had to encounter in formulating its Marketing Strategy.

• Socio-Cultural • Economic Environment• Political/Legal• Technology• Demographic Environment

Population sizeAge groupsEducational LevelsGrowth rate of populationRegional DistributionIncome levels

1950’s-1980’s: GOVERNMENT POLICY OF EXCESSIVE REGULATION

INDUSTRIAL DEVELOPMENT POLICY TO AVOID OVERCAPACITY

• Regulations governing Product.Licenses required for productionCapacity Restriction because of Capital Scarcity

• Regulations governing Technology,• Regulations governing Foreign Exchange. Restrictive Import Policies.Marketing Implication• Pent up Consumer need for Transportation

EFFECT OF INDUSTRIAL POLICY ON BAJAJ AUTO LTD.

1950-1956: Initial Imports of Scooters & 3-Wheelers from Piaggio (Italy), Vespa Brand1959: Bajaj obtained a License to Produce in India1960: Technical Collaboration with Piaggio to Manufacture Vespa Brand in India. Plant set up in Akurdi (Pune)1960’s: Decade of Indigenization. Initial Assembly with parts from Piaggio. Local Components in Vespa scooter were only 26%.

Establishment of Dealer network in India

1969 Government Policy Regulations restricted increase in production capacity.

Up till 1969 it was a Sellers Market (for 22 years). Demand more than supply. Long Waiting lists, averaged 10 years 1950-1972.

What was Bajaj Auto’s Market Orientation during this period?

Application of the Selling Concept. It was a Selling Orientation.

Demand outstripped capacity. It was a Protected seller’s market..

Protected market for BAL. Largest market share.

1971: New Government Regulations prohibited continuation of Alliance.

What was Bal’s Market Orientation during this stage?

1980’s-1990’s Government Policy Changed.• Lifting of Restrictions.• Lifting of Manufacturing capacity constraints. Second Plant set up in Waluj (Aurangabad). Production Operations in 2 shifts• Inflow of foreign technology + equity

Application of the Production Concept. It was a Production Orientation.

1990-1995 ECONOMY IN RECESSION

• Recession of Indian economy in early 1990’s• Inflation occurred simultaneously. Inflation Rate = 13% average for these five years.• High Interest rates from Banks.• Consumers felt the pinch. Decline in Purchasing Power.

Market demand fell. 1991-1992 Decline in domestic demand by 5% (See pg. no)

•Overcapacity in industry.•Market saturation.

This was the result of the Production Orientation.

1993: MARKET TASTES: Consumer tastes were changing Value for money plus Visual appeal

Entry of CompetitorsCOMPETITION: 6 Competitors All had technical collaboration with foreign companies.

Competition from Japanese two-wheeler manufacturers.

What was Bajaj Auto’s Marketing Orientation at this stage?

Shift to the Customer Orientation. Application of the Marketing Concept.

Company Orientations to the Marketplace

•PRODUCT CONCEPT•PRODUCTION CONCEPT•SELLING CONCEPT•MARKETING CONCEPT•SOCIETAL MARKETING CONCEPT

Production ConceptProduction Concept

Product ConceptProduct Concept

Selling ConceptSelling Concept

Marketing ConceptMarketing Concept

Consumers prefer products thatare widely available

and inexpensive

Consumers favor products that offer the most quality, performance,

or innovative features

Consumers will buy products only ifthe company aggressively

promotes/sells these products

Focuses on needs/ wants of target markets & delivering value

better than competitors

Company Orientations Towards the Company Orientations Towards the MarketplaceMarketplace

ASSUMPTIONS/PREMISE

Apply these orientations to the Bajaj Auto Case

THE MARKETING CONCEPT

What it Means: The key to achieving organizational goals is to integrate marketing activities towards determining and satisfying needs and wants of consumers.Assumption: The company is assumed to have a Customer orientation.

CHARACTERISTICS OF THE MARKETING CONCEPT

1. TARGET MARKET: First identify and define the target market. No company can operate in all markets.

2. CUSTOMER NEEDS: What is the customer’s need? Customer oriented thinking require defining customer needs from the customer’s point of view

3. INTEGRATED MARKETING All departments work together to serve the customer’s interests. The various marketing functions must work together.

4. PROFITABILITY Profits through customer satisfaction.

FOUR PILLARS OF THE MARKETING CONCEPT

THE SOCIETAL MARKETING CONCEPTTo deliver customer needs/wants/interests more effectively and efficiently than competitors but in a way that enhances consumers and society well being. IMPLICATIONS: Need to build in social and ethical considerations into marketing profits. Soap Detergent:

Biodegradability

Plastics: Biodegradability

Paper: Recyclable

Chemical Pollutants in Food

Polystyrene Cartons causing Pollution: Replaced by Paper Napkins

Solar Energy Appliances

Electric Automobilies

COMPANY ORIENTATIONS IN THE MARKETPLACE

PRODUCTION CONCEPT

What it Means: The company management focus is on production efficiency and lower costs.

Assumption/Premise: That consumers will favor products t hat are widely available.

EXAMPLES: TEXAS INSTRUMENTS, (Calculators) FORD MOTOR: Production philosophy to expand the market.

Texas Instruments put all its efforts into building production volume to lower costs and bring down prices.

PRODUCT CONCEPT

What it Means: `A love affair with the product’ Company focus is on making superior products.

Ex. Steve Jobs `NeXT’ computer, investment $200 million, sale price $10,000.

Assumption: Consumers will favor quality products, irrespective of price.

Theodore Levit’s `Marketing Myopia’

SELLING CONCEPT

What it Means: A company must undertake aggressive selling and promotion. Sell what you can make, rather than make what you can sell.

Assumption: Consumers will not buy unless coaxed. Buying inertia and resistance.

Aggressive selling and promotion is required.

Customer Delivered Customer Delivered ValueValue

Comparing the Selling Concept and Marketing Concept

MarketIntegratedmarketing

Profits throughcustomer

satisfactionCustomer

needs

The Marketing Concept

FactoryExistingproducts

Selling andpromotion

Profits throughsales volume

Startingpoint Focus Means Ends

The Selling Concept

BAL’s MARKETING STRATEGY

1993: Conscious formulation of Marketing Strategy.

Marketing objective: Increase sales to 1 million units.Maintain 50% market shareMarket leadership in all 2 wheeler subcategories (Apply Exhibit 7)

MARKETING MIX STRATEGY:Mix of Product Strategy, Pricing Strategy, Distribution and Advertising/Promotion Strategy.

THEMARKETING MIX

The Set of Tools the firm uses to pursue its marketing objectives

in the target market

THE MARKETING MIX

PRICE

•LIST PRICE•DISCOUNTS

•ALLOWANCES•PAYMENT PERIOD

•CREDIT TERMS

PROMOTION

•SALES PROMOTION•ADVERTISING•SALES FORCE

•PUBLIC RELATIONS•DIRECT MARKETING

PLACE•CHANNELS•COVERAGE•LOCATIONS•INVENTORY•TRANSPORT

PRODUCT

•PRODUCT VARIETY•QUALITY•DESIGN

•FEATURES•BRAND NAME•PACKAGING

•SIZES•SERVICES

•WARRANTIES•RETURNS

Decisions to be taken by the Company on:

The Four The Four PsPs

Synergy

BAL’s PRODUCT STRATEGY (1992)

•Product line expansion: Full line of 2 and 3 wheelers to protect market share (12 models)•Emphasis on Product Improvement•Quality Improvement •Phasing out of old models. •Emphasis on Styling, features•Improved suspension•Better lighting•Improved electrical system•Electronic ignition•Fuel economy•Bajaj scooter upgrade program

To what extent did Bajaj Auto Implement the Marketing Concept?

Foreign Collaboration with Kawasaki

DISTRIBUTION STRATEGY

•330 Exclusive Dealers•75 Private Transport Companies•Computerization of Distribution System. Linking of Dealers to BAL Family.•Spare Parts supply through Service/Dealer Network.•Extensive Distribution of Spare Parts.•800 Service Centres•No Credit Policy for Dealers•Setting up of Regional Depots to improve Availability and reduce lead time 8 Depots•Dealer Satisfaction/Loyalty Competitive Advantage

ADVERTISING/PROMOTION STRATEGY (1992)

1% of Sales

Doubling of Ad Expenditure from 1991-92

Competitive Ad Expenditure Competitors also spent 1% of Sales.

Maintain Brand Awareness and Brand Preference

Ads were developed in collaboration with Dealers

TV Advertising 45% of Total Media Expenditure

Slice of Life Advertising. 45% Print Advertising

Emphasis on technical features/Kawasaki Brand Name

Positioning of Product as an investment

Cooperative advertising Matching Advt/Prom Expenses with dealers 1: 1 for local press ads.

All Dealer POP was provided by BAL

PRICING STRATEGY

Retail Price was increased by 7%

Manufacturer Margin 15%.

Dealers 4%

Reasonable Pricing Low Cost Producer

50% of Comparable Japanese Motorcycles

Product emission regulations by govt

Product strategy change to 4 stroke engine

Use of fuel injection technology

Price premium 15%

COMPETITORS (1992)Bajaj Auto: 46.5% (All 2 Wheelers)Others: 53.5%

2 wheelers Bajaj Kawasaki 3 wheelersKinetic: Scooters MopedsHero Motorcycles, MopedsLML Only scootersEscort Only MotorcyclesTVS Motorcycles, mopedsFOREIGN COLLABORATIONS:Kinetic-HondaHero-HondaLML-PiaggioEscorts-Suzuki

What were the MARKETING STRATEGY ALTERNATIVES open to BAL? (1992)

1. Should Bajaj Auto go for the Rural Market? Large Growing Market

Population in Rural Areas = 74%. BAL’s Market Share (1992) = 60%.

Inference: Scope for Rural Market Penetration.

2. Should Bajaj Auto go for Exports?

3. Should Bajaj Diversify into other consumer durables IN THE Domestic Market?

DO A COST/BENEFIT ANALYSIS

MARKETING GROWTH

STRATEGIES

Sal

esS

ales

10105500Time (yearsTime (years)

MARKETING GROWTH STRATEGIES

THE STRATEGIC-PLANNING GAP

Desiredsales

Desiredsales

Integrative growth BACKWARD/FORWARD INTEGRATION

Intensive growthPRODUCT-MARKET GROWTH STRATEGIES

ExistingProductsExistingProducts

TheTheStrategic-Strategic-planningplanning

gapgap

DiversificationDiversification growthgrowthStrategyStrategy

ExpectedSales

FutureSales

Three Intensive Growth Strategies: Ansoff’s Product/Market Expansion Grid

4. Diversification2. MarketdevelopmentStrategy

Newmarkets

1. MarketpenetrationStrategy

Existingmarkets

ExistingProducts

3. Productdevelopment

NewProducts

Intensive

Growth

Strategies

How BAL could achieve Intensive Growth …..

PRODUCT LINE EXPANSION

BAL Three Wheelers

ELECTRICAL APPLIANCES Cooking Ovens

Two Wheelers

Related Technology Unrelated Technology

NEW MODELS STYLE,DESIGN IMPROVEMENT

URBAN MARKET

RURAL MARKET

PASSENGER CARS

EXPORT MARKETS

Diversification Strategies may be:

• Concentric Diversification: Same or Related Technology, Different products for the same market.

•Horizontal Diversification: Unrelated Technology, Different Products for the Same market.

•Conglomerate Diversification: Entirely different technology, different product for a new market.

Example:Market Diversification Strategy Wills Cigarettes. Lifestyle Clothing, Liquor, Beer, Frozen Foods, Soft Drinks.

How to Classify Bajaj Auto’s SBU’s

SBU 1: Two Wheelers: 50cc Mopeds, 100 cc MotorCycles,

150cc Scooters ALL THESE will all normally comprise one SBU.

SBU 2: Three Wheelers

SBU 3: Passenger Cars

SBU 4: Bajaj Auto Finance

SBU 5: Bajaj Electronics

Can we apply the Boston Consulting Group Model to Bajaj Auto?

The Boston Consulting Group’s Growth-Share

Matrix20%-20%-18%-18%-16%-16%-14%-14%-12%-12%-10%-10%- 8%-8%- 6%-6%- 4%-4%- 2%-2%- 00M

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Relative Market Share.5x .4x .3x .2x .1x .5x .4x .3x .2x .1x

Stars

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MARKET SHARE RELATIVE TO LARGEST COMPETITOR

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