Company Analysis

Team Stratosphere
Company Background
• Industry : Automotive
• Founded : November 29, 1945; 72 years ago
• Founder : Jamnalal Bajaj
• Headquarters: Pune, India
• Key people : Rahul Bajaj (Chairman)
Rajiv Bajaj (CEO)
• Products Motorcycles, three-wheeler vehicles and cars
• Revenue : Increase Rs. 226.8759 billion (US$3.5 billion) (2015–16)
• Net income: Rs. 35.6254 billion (US$550 million) (2015–16)
• Employees : approx. 10,000 (2016)
Financial Analysis
Balance Sheet
Balance Sheet Contd.
Ratio Analysis
Ratio Analysis Contd.
 Bajaj Auto’s Key Financial Summary of FY2017
• Net sales de-grew by 3.5% to Rs. 21,374 crore. Total operating income (net sales plus other operating
income) decreased by 3.2% to Rs. 22,026 crore.
• Operating earnings before interest, taxes, depreciation and amortisation (EBITDA) reduced by 5.3% to
Rs. 4,778 crore.
• The operating EBITDA margin was 21.7% of net sales and other operating income, which continues to
remain the highest in the industry.
• Operating profit reduced by 5.6% to Rs. 4,470 crore.
• At 20.3%, the operating profit margin to net sales plus other operating income was also the highest in
the industry.
• Profit before tax (PBT) de-grew by 3.8% to Rs. 5,336 crore.
• Profit after tax (PAT) declined by 2.6% to Rs. 3,828 crore.
• Surplus cash and cash equivalents as on 31 March 2017 was up by 36% at Rs. 12,368 crore.
• Consolidated Profit after tax remained flat at Rs. 4,079 crore.
Share Price Variance – Last 5 Years
Internal & External
Environment
Analysis
 PEST Analysis
Political
• Investment policy 100 per cent foreign direct investments (FDI) are allowed in
companies through the automatic approval route.
• International companies can invest in India either by picking up a 100 % equity
stake or by acquiring a share jointly with another company in the auto and auto
ancillary segments.
• Policy aims to promote a globally competitive auto industry in India.
Key Factors – Political
• Import policy & Fiscal regulations
• In order to protect the domestic industry and restrict likely imports, the government still
sets high duties on these imports.
• Excise duty
• Changes in duty rates have an impact on demand too. Recently, the excise duty on the
<250cc engine capacity two wheelers was lowered. This caused a shift in consumer
preference from mopeds to motorcycles.
• GST
• Tax subsidies and unified tax scheme has greatly benefitted the Manufacturing
Industry as a whole, thus availing its benefits int Bajaj also. But overall price has risen
in some cases leading to customer dissatisfaction and loss of sale.
• Emission control laws
• India has one of the most stringent emission norms in the world.
• Tighter emission standards have edged out two stroke motorcycles, which emit high
levels of hydrocarbons and particulates vis-a-vis four-stroke bikes.
Economical
• Interest Rates
• Large firms have a cost advantage due to lower rates of interest they are charged while
applying for loans (lower risk involved).
• The buyer needs information on interest rates as these help determine whether or not it is
economical to make a purchase.
• Customers are highly price sensitive and higher interest rates may lead to higher prices if the
buyer needs a loan to make the purchase.
• Inflation
• Inflation increases cost of purchase for different players differently, depending on the inputs
and sources, may make it difficult for new players to enter.
• The buyer is highly price sensitive, and changes in prices affect the industry as a whole as
buyers may not be in a position to buy a more expensive product
• Economic Prospects
• A lot of capital is needed to enter the industry, which may be difficult to come by if the
economy is not doing well, and relatively easier to obtain if the economy is doing well.
• These buyers are highly sensitive to price, but in times of good economic conditions, prices
may no longer remain important criteria as disposable income of the population also goes
up.
Social
• Age of the Population : As the demographics of India is skewed towards the
youth, more and more people are likely to tread unknown paths.
• Population have a strong/weak opinion on green issues (environmentally
safe).
• More educated people are focussed towards greener issues, which Bajaj
has been able to address significantly through CSR.
Technological
• Substantially increasing investments in production capacities by competent
players.
• Considerable investment in R & D Departments by all players.
• Proficiency in Understanding Technical Drawings, specifications and well
conversant in all Global Automotive Standards.
• Increased raw material costs. Increasing costs due to business cycles, rising
steel and oil prices.
Demand and Growth Drivers
Personal Income
Demand increases as the income increases, only to be substituted later by the demand for four wheelers.
Income has been steadily growing in India and is projected to stabilise at a growth rate of 9-12 percent
range by 2012.
Demography and Inspiration
The bigger the young and working population, the greater is its need for commutation. The IT and BPO
revolution has influenced this movement. This is a favourable factor since India’s workforce is young.
Penetration Level
The lower the penetration levels in the market, the better the scope for future demand. As the penetration
of the rural market is significantly low, it is going to be a significant long term growth driver.
Other Factors
Improvement in infrastructure increases competition, while simultaneously improving the public transport.
The average time period taken to replace an existing bike with a newer model has decreased from 7 years
to 5 years, resulting in replacement demand growth.
Porter’s 5 Forces Analysis – Industry
Analysis
Threat of new entrants: low
• 2W manufacturing is capital intensive business
• OEM manufactures need strong distribution networks and good after sale service
set up to be successful in Indian market.
• 4 players control 90% of the market.
Threat of substitutes: Medium- low
• Public transport is not fully developed in India. 2W also provide last mile
connectivity. In the future metros and robust public transport system can act as a
substitute.
• Electric 2W & cycles – People in the IT corridors have started using cycle as a mode
of transport, however this trend is yet to catch up. Electric 2W haven’t really taken
off India, support from government and favorable policy may help in the future.
Porter’s 5 Forces Analysis – Industry
Analysis
Bargaining power of suppliers: low
• Original equipment manufacturer(OEM) buy components in bulk and suppliers do
not have pricing power.
• Presence of various suppliers, low switching cost.
• Cheap import from china.
• Suppliers are paid for their supplies usually after sometime, this is evident from
negative working capital that almost all 2W manufacturers enjoy.
Bargaining power of buyers: high
• Buyers have various options to choose from. Switching cost is low.
• Prices of 2W in the same segment need to be competitive to attract buyers.
• Goodies/gifts given to buyers by dealers to attract customers by companies.
Porter’s 5 Forces Analysis – Industry
Analysis
Industry Rivalry: high
• Currently there are 13 players in the scooters and motorcycle segment.
• OEM manufacturers sees India as a high growth market.
• Majority of players are present both in scooters and manufacturers segment.
SWOT Analysis – Bajaj Auto
Strength Weakness
• Brand positioning (Diverse portfolio for • Lack of Presence in the scooter
diverse customer base across the world) market (Scooter business is blooming
• Sustainable business (Diversity = and showed a growth of 12% in 2016)
Sustainability) • Labour issues (Chakan plant –
• Alliance with KTM (Technical Assistance) damages Bajaj’s image)
• Strong Distribution (More than 10,000 • Not a Global brand
retailers across Southern Asia)
• Awards and recognition (Competent R&D
team, adds to goodwill & brand value)
• Market share in two wheeler category
(18% FY2017)
SWOT Analysis – Bajaj Auto
Opportunities
• Growth in motorcycle market
($75000 million in 2016 growth
of about 6.3%)
• Growing India three wheeler
Industry (11.51% in FY2016 and
is expected to grow at a CAGR of
4.4% )
• Launching of new vehicles
Threats
• Intense competition in the 2-
wheeler market (fuel effeciency,
performance, styling, pricing)
• High Bank interest rates (India
has a higher lending rate)
• Environmental Regulations
(Strict environmental regulations
– BS regulations are constantly
updated)
Core Competencies – Bajaj Auto
• Access to wide range of technology in the 2 wheeler segment
(Previously Kawasaki, now KTM and more recently Triumph
Motorcycles)
• R&D Department of Bajaj Auto (Cost reduction without hampering
performance and durability)
• Effecient and Effective Management Team (Immense understanding &
experience of the market)
BCG Matrix

Question Marks – KTM, Dominar, V15,

V12 – New in the market, increasing
demand and sales
Star – Pulsar NS Range, 3 Wheelers,
Avenger Range, Discover range, high
demand, high sales
Cash Cows – Bajaj Pulsar (Old Range),
Platina, Bajaj Autorickshaws – High
demand and sales, consistent market, low
growth
Dogs – Bajaj CT Range, Bajaj Boxer range –
Unpopular, low sales
Assesment of Internal
Environment
Factors affecting Internal Environment
• Value System
• Learning
• Perfection
• Speed
• Transparency
• Mission To focus on value based manufacturing
• To improve continually
• To totally eliminate wastes
• To maintain pollution free and safe environment
• Objectives
• To cater to the market needs of transportation by providing 2 wheeler and 3 wheeler
vehicles
• To produce a huge catalogue products to cater to the changing market requirements
• To take consumer feedbacks improvements for existing products.
Factors affecting Internal Environment
• Organization Structure
• Rahul Bajaj – Chairman
• Rajiv Bajaj – Managing Director
• Pradeep Shrivastava – Executive Director
• Madhur Bajaj – Vice Chairman
• R C Maheshwari – President (Commercial Vehicle Business)
• Rakesh Sharma – President (International Business)
• Eric Vas – President (Motorcycle Business)
• Kevin P D’sa – President (Finance)
• S Ravikumar – President (Business Development & Assurance)
• Amit Nandi – president (KTM Distribution)
• Ravi Kyran Ramasamy – President (HR)
• Subhash Rao – President (Retail Finance)

The five pillars of this new structure, called strategic units, are,
• R&D
• Engineering
• Two-wheeler business unit
• Commercial vehicles business unit and
• International business unit
Factors affecting Internal Environment
• Corporate Culture
• The company gives good work environment with good systems and practices.
• The R&D division is highly innovation driven and composed of young and dedicated engineers.
• The work environment is cordial and encouraging.
• The employees are given good knowledge from various training sources.
• With over 10,000 employees the work culture and work ethics are excellent
• Employees can work with lot of freedom..
• Quality of Human Resource
• The Company believes that equal opportunity in employment for all sections of the society is a component of its
growth and competitiveness.
• They provide paid holidays and good performance bonus.
• They maintain a good Interaction amongst senior and junior employee.
• Labour Unions
• President of Bajaj Auto labour union — Vishwakalyan Kamgar Sanghatna (VKS) — Dilip Pawar went on an indefinite
hunger strike from January 29, 2018.
• He did this to press for an immediate settlement of the wage agreement for workers at Chakan and Akurdi plants.
• Negotiations for the wage agreement for April 2016-March 2019 have been going on between the management and
the union.
• They have a nice approachable senior leadership.
• Good transparency and communication with peers and higher management is found.
Personal Beliefs and aspirations
of key persons and stake-holders
Aspiration of Key Stakeholders
Rahul Bajaj - Chairman
• “India is today a nation in transition. From license raj to competition, from
commodity to brands, from domestic to global markets, we are expanding. Our
marketing strategies have to grasp with our own realities. Success today hinges on
the ability to anticipate or better still to create a future, and who better to influence
than marketing people who are closest to the markets.”
• Rajiv Bajaj – Managing Director
• “By the end of the day, it is important to focus on one thing and do it well, which
explains why we will stick to our core competence in motorcycles and steer clear of
scooters,” “I am happy that our market share in motorcycles is close to 20 per cent.
There will be some impactful launches by January, which goes in line with each and
every move of ours”
Aspiration of Key Stakeholders
• R.C. Maheshwari – President
• “We invest over Rs.100 crore a year on R&D,” he said, “which is twice as much as our investment in
production and capacity.” “We have not got as much land as needed. We have 250 acres, but need
100 acres more. We may consider using our land in Aurangabad or acquiring land near our plant at
Pantnagar.”
• Rakesh Sharma – President (International business)
• “The company is executing an aggressive expansion plan to get into newer countries.
This, coupled with the recent market share gains, will hold the firm in good stead
and minimize the impact of any macroeconomic headwinds. By end of fiscal 2017,
we should enter a dozen new export markets.”
Aspiration of Key Stakeholders
S. Ravikumar – President (Business development and assurance)
• “He said almost all the export markets like Africa, Bangladesh, Nepal, and
Philippines are doing well, adding that new markets are also adding good numbers
to sales. Only Columbia seems to be a dull spot. Domestic two-wheeler sales were
a cause of worry couple of months back but with new Discover twins, the sales
went up to 27000 units this month.”
• Amit Nandi – President (Probiking)
• “Kawasaki and Bajaj have mutually arrived at an amicable decision to end their
alliance in India.”
• “Bajaj and Kawasaki will continue to maintain their co-operative relationship across
the rest of the world for current and future businesses.”
Employees’ reviews
• Bureaucracy in the company seems annoying at sometimes.
• The organization gives a lot of learning opportunities.
• The company encourages employees for further education to promote
them within the company.
• The company follows strict hierarchy.
• The workforce is less and hence the work load is more.
• There is lack of interdepartmental co-ordination.
• Still it is one of the best organization to learn and apply sales and
management driven concepts.
Customer’s reviews
• Availability of spare parts of two wheelers at service centers is an issue.
• Service charge is charged extra than the amount required to be charged.
• Rude behavior of service department makes it impossible for the
customer to continue.
• Overcharging of emi makes the deal difficult to run.
• The interest loans for two- wheelers are satisfactory.
• The customers believe that the products are worth the price demanded.
Key Competitors & Analysis
Two-Wheelers Segment
• Bajaj Auto Limited
• TVS Motors
• Hero Motocorp
• Yamaha Limited
• Royal Enfield

Our choice of key competitors are TVS Motors & Hero Motocorp
 SWOT Analysis of Two–Wheelers
Strengths Weakness
TVS Motors
• Huge brand equity and one of the biggest players in
TVS Motors
the two wheelers Indian market
• Excellent R&D, and wide variety of products in every • Absence in the premium bike segment.
segment
• Associating itself with celebrity brand ambassadors • Unavailabilty of spare parts
• ‘Scooty’ as a brand has become a second name for
the scooterrate segment.

Hero Motocorp Hero Motocorp

• Excellent distribution, over 3000 dealerships and service
centers
• Good advertising and excellent branding & marketing of Hero
Moto Corp
• More than 5000 people are employed with the organization
• Sponsorship of many events related to sports & racing has
made Hero Moto Corp a strong brand
• Intense competition from Indian and
international players means limited market
share growth of Hero Moto Corp
• Most of the products have similar features
and low on design and innovation.
 SWOT Analysis of Two–Wheelers
Opportunities Threats

TVS Motors TVS Motors

• Two-wheeler segment is one of the most
growing industries.
• Export of bikes is limited i.e. untapped
international markets.
• Strong competition from Indian as well as
international brands
• Dependence on government policies and rising fuel
prices.
• Better public transport will affect two-wheeler
sales.

Hero Motocorp Hero Motocorp

• Two-wheeler segment is one of the most
growing industries
• Export of Hero Moto Corp bikes is limited i.e.
untapped international markets
• Introduction of bikes in the premium segment
• Strong competition from Indian as well as
international brands
• Dependence on government policies and rising fuel
prices can affect business margins for Hero Moto
Corp
• Better public transport will affect two-wheeler
sales.
Three-Wheelers Segment
• Bajaj Auto Limited
• PIAGGIO
• Atul Auto
• Mahindra & Mahindra
• TVS Motors
• Scooters India

Our choice of analysis of key competitors are Piaggio and Atul Auto.
 SWOT Analysis of Three-wheelers
Strengths Weakness
Piaggio Piaggio
 It is the leader in scooter market in Europe and It
has a global brand awareness.  It is more focused in the Italian market.
 It has well-diversified product range to be served  Their 45% of the revenues come from the
to customers and has global presence and 50cc segment in the market.
especially in the Third-world markets.
 Capillary distribution network is delivering
products to the directly to the final seller there
are no middle agents involved.

Atul Auto Atul Auto

As there are large players operating in the
• Due to reduction in labor costs , profits have been market which leads to more competition.
maximized.
• Future profitability in three-wheeler market is
• Has increased in the last five years in domestic uncertain since, it is not in a mainstream
market. automobile industry.
 SWOT Analysis- contd.
Opportunities Threats
Piaggio Piaggio
 It is expanding in the emerging markets like in Vietnam, • Competition was increasing due to many low-cost
china and India. competitors.
 It is going more towards product innovation. • European market is dwindling and their sales are
 Whatever loss they incur, it could recover from decreasing at a slow rate.
superbike brand such as Aprilia and Moto Guzzi. • Increase cost in raw materials lead to fluctuations in the
market.

Atul Auto Atul Auto

• Due to increase in growth rates there is further chance in • Cost of raw materials are at a constant increase
future profitability, though uncertain with growth in demand.
thus decreasing profitability.
• With rise in demand arises the need of invention of new • Due to less updated technology, problems arises
products and services.
which becomes a threat.
• With rise in Indian economy, income level is at a constant
increase
Strategy Recommendations
• Growth Strategies
• Graduating Customers from the 100cc to Higher Segments
• Acquisitions & Mergers
• Product & Market Development Strategies
• Focus on Gearless Scooters
• Entry into Four Wheeler Segment
• Focus on Exports and Global Market
• Financial Strategies
• Focus on Easy Credit Lending
Strategy Recommendations
• Operational Strategies
• Investment in Research and Development
• Disbanding of Dedicated Sales Force for each Product
• Organizational & HRM Strategies
• Regular meetings can be done with workers encouraged to build trust and co-
ordination among them and different departments.
• Company can reposition existing people in key positions and place emphasis
on training programs.
• Hiring professional consultants
• Company can outsource non-core manufacturing activities.
Thanking you for your time.
Questions if any?