Chapter 1 INTRODUCTION

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CONSUMER BEHAVIOR: THE PSYCHOLOGY OF MARKETING

Introduction The study of consumers helps firms and organizations improve their marketing strategies by understanding issues such as how

The psychology of how consumers think, feel, reason, and select between different alternatives (e.g., brands, products, and retailers); The psychology of how the consumer is influenced by his or her environment (e.g., culture, family, signs, media); The behavior of consumers while shopping or making other marketing decisions; Limitations in consumer knowledge or information processing abilities influence decisions and marketing outcome; How consumer motivation and decision strategies differ between products that differ in their level of importance or interest that they entail for the consumer; and How marketers can adapt and improve their marketing campaigns and marketing strategies to more effectively reach the consumer.

One "official" definition of consumer behavior is "The study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society." Although it is not necessary to memorize this definition, it brings up some useful points:

Behavior occurs either for the individual, or in the context of a group (e.g., friends influence what kinds of clothes a person wears) or an organization (people on the job make decisions as to which products the firm should use). Consumer behavior involves the use and disposal of products as well as the study of how they are purchased. Product use is often of great interest to the marketer, because this may influence how a product is best positioned or how we can encourage increased consumption. Since many environmental problems result from product disposal (e.g., motor oil being sent into sewage systems to save the recycling fee, or garbage piling up at landfills) this is also an area of interest. Consumer behavior involves services and ideas as well as tangible products.
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The impact of consumer behavior on society is also of relevance. For example, aggressive marketing of high fat foods, or aggressive marketing of easy credit, may have serious repercussions for the national health and economy.

There are four main applications of consumer behavior:

The most obvious is for marketing strategyi.e., for making better marketing campaigns. For example, by understanding that consumers are more receptive to food advertising when they are hungry, we learn to schedule snack advertisements late in the afternoon. By understanding that new products are usually initially adopted by a few consumers and only spread later, and then only gradually, to the rest of the population, we learn that (1) companies that introduce new products must be well financed so that they can stay afloat until their products become a commercial success and (2) it is important to please initial customers, since they will in turn influence many subsequent customers brand choices.

A second application is public policy. In the 1980s, Accutane, a near miracle cure for acne, was introduced. Unfortunately, Accutane resulted in severe birth defects if taken by pregnant women. Although physicians were instructed to warn their female patients of this, a number still became pregnant while taking the drug. To get consumers attention, the Federal Drug Administration (FDA) took the step of requiring that very graphic pictures of deformed babies be shown on the medicine containers.

Social marketing involves getting ideas across to consumers rather than selling something. Marty Fishbein, a marketing professor, went on sabbatical to work for the Centers for Disease Control trying to reduce the incidence of transmission of diseases through illegal drug use. The best solution, obviously, would be if we could get illegal drug users to stop. This, however, was deemed to be infeasible. It was also determined that the practice of sharing needles was too ingrained in the drug culture to be stopped. As a result, using knowledge of consumer attitudes, Dr. Fishbein created a campaign that encouraged the cleaning of needles in bleach before sharing them, a goal that was believed to be more realistic.

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As a final benefit, studying consumer behavior should make us better consumers. Common sense suggests, for example, that if you buy a 64 liquid ounce bottle of laundry detergent, you should pay less per ounce than if you bought two 32 ounce bottles. In practice, however, you often pay a size premium by buying the larger quantity. In other words, in this case, knowing this fact will sensitize you to the need to check the unit cost labels to determine if you are really getting a bargain.

There are several units in the market that can be analyzed. Our main thrust in this course is the consumer. However, we will also need to analyze our own firms strengths and weaknesses and those of competing firms. Suppose, for example, that we make a product aimed at older consumers, a growing segment. A competing firm that targets babies, a shrinking market, is likely to consider repositioning toward our market. To assess a competing firms potential threat, we need to examine its assets (e.g., technology, patents, market knowledge, awareness of its brands) against pressures it faces from the market. Finally, we need to assess conditions (the marketing environment). For example, although we may have developed a product that offers great appeal for consumers, a recession may cut demand dramatically.

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Consumer Perception
Perception (from the Latin perceptio, percipio) is the process of attaining awareness or understanding of sensory information. Perception results when the brain processes and interprets physical signals that have activated the sensory organs. For example, vision involves light striking the retinas of the eyes, smell is mediated by odor molecules and hearing involves pressure waves. Perception is not the passive receipt of these signals, but can be shaped by learning, by memory and expectation. Perception involves these "top-down" effects as well as the "bottom-up" process of processing sensory input. Since the rise of experimental psychology in the late 19th Century, perceptual psychology has progressed by combining a variety of techniques. Psychophysics measures the effect on perception of varying the physical qualities of the input. Sensory neuroscience studies the brain mechanisms underlying perception. Perceptual systems can also be studied computationally, in terms of the information they process. Perceptual issues in philosophy include the extent to which sensory qualities such as sounds, smells or colors exist in objective reality rather than the mind of the perceiver. Although the senses were traditionally viewed as passive receptors, the study of illusions and ambiguous images has demonstrated that the brain's perceptual systems actively and pre-consciously attempt to make sense of their input. There is still active debate about the extent to which perception is an active process of hypothesis testing, analogous to science, or whether realistic sensory information is rich enough to make this process unnecessary. The perceptual systems of the brain enable individuals to see the world around them as stable, even though the sensory information may be incomplete and rapidly varying. Human and animal brains are structured in a modular way, with different areas processing different kinds of sensory information. Some of these modules take the form of sensory maps, mapping some aspect of the world across part of the brain's surface. These different modules are interconnected and influence each other. For instance, taste is strongly influenced by smell.

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Features
Constancy Perceptual constancy is the ability of perceptual systems to recognize the same object from widely varying sensory inputs. For example, individual people can be recognized from views, such as frontal and profile, which form very different shapes on the retina. A coin looked at face-on makes a circular image on the retina, but when held at angle it makes an elliptical image. In normal perception these are recognized as a single threedimensional object. Without this correction process, an animal approaching from the distance would appear to gain in size. One kind of perceptual constancy is color constancy: for example, a white piece of paper can be recognized as such under different colors and intensities of light. Other constancies include melody, odor, brightness and words. The perceptual systems of the brain achieve perceptual constancy in a variety of ways, each specialized for the kind of information being processed. Grouping

The principles of grouping (or Gestalt laws of grouping) are a set of principles in psychology, first proposed by Gestalt psychologists to account for the observation that humans naturally perceive objects as organized patterns and objects. Gestalt psychologists argued that these principles exist because the mind has an innate disposition to perceive patterns in the stimulus based on certain rules. These principles are organized into five categories: Proximity, Similarity, Closure, Good Continuation, Common Fate, and Good Form .Later research has identified additional grouping principles.

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Contrast effects

A common finding across many different kinds of perception is that the perceived qualities of an object can be affected by the qualities of context. If one object is extreme on some dimension, then neighboring objects are perceived as further away from that extreme. "Simultaneous contrast effect" is the term used when stimuli are presented at the same time, whereas "successive contrast" applies when stimuli are presented one after another. The contrast effect was noted by the 17th Century philosopher John Locke, who observed that lukewarm water can feel hot or cold, depending on whether the hand touching it was previously in hot or cold water. In the early 20th Century, Wilhelm Wundt identified contrast as a fundamental principle of perception, and since then the effect has been confirmed in many different areas .These effects shape not only visual qualities like color and brightness, but other kinds of perception, including how heavy an object feels. One experiment found that thinking of the name "Hitler" led to subjects rating a person as more friendly .Whether a piece of music is perceived as good or bad can depend on whether the music heard before it was unpleasant or pleasant .For the effect to work, the objects being compared need to be similar to each other: a television reporter can seem to shrink when interviewing a tall basketball player, but not when standing next to a tall building.

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How to Measure Consumer Perception

Customers that are satisfied with a product or business have an overall good perception of that product or business. When consumers' perceptions are good, they will continue purchasing goods from this company. These customers also will avoid spreading disappointing experiences to others. Consumer perceptions are based on feelings. A customer perception measurement is an important tool used by companies that expresses how well the companies are satisfying customers.

Instructions 1. Perform market research on your company's products. When measuring customer perceptions, the first step a company should take is to identify what customers are actually buying and why. 2. Create a survey to give customers. The only way to measure and increase customer's positive perceptions of your company is to ask customer's how they feel about your company. By creating a survey, you are able to get information directly from the customer. In order for the survey to be successful, it should contain several key elements. The survey must be relatively simple and short. The survey must also be created in a way that would allow actionable reports to be generated from the information it contains. 3. Analyze survey results. After surveys are distributed and re-collected, the company should analyze the results. When analyzing results, you must remember that customer perception is subjective. It varies immensely from person to person and one particular measurement may not be appropriate for the entire sample taken. 4. Measure the results. After the results are analyzed, the information should be measured. This is accomplished by answering several key questions including: are we understanding and meeting the expectations of customers? The results of the survey can be compared to results of previous surveys. Each time a survey is conducted the results should become better.

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Consumer Research Methods

Market research is often needed to ensure that we produce what customers really want and not what we think they want. Primary vs. secondary research methods There are two main approaches to marketing. Secondary research involves using information that others have already put together. For example, if you are thinking about starting a business making clothes for tall people, you dont need to question people about how tall they are to find out how many tall people existthat information has already been published by the U.S. Government. Primary research, in contrast, is research that you design and conduct yourself. For example, you may need to find out whether consumers would prefer that your soft drinks be sweater or tarter. Research will often help us reduce risks associated with a new product, but it cannot take the risk away entirely. It is also important to ascertain whether the research has been complete. For example, Coca Cola did a great deal of research prior to releasing the New Coke, and consumers seemed to prefer the taste. However, consumers were not prepared to have this drink replace traditional Coke.

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SELECTED RESEARCH METHODS

Advantages and Disadvantages Methods Surveys Advantages Mail : Low cost ; ability to show text and graphics .Telephone : Moderate cost ; ability to screen select respondents meeting desired criteria. Mall intercept Able to reach more potential respondents ; able to prescreen respondents for desired criteria . Online Conditional branching , fast , limited data entry Able to eliminate extraneous influences and identify causes of choice and behavior . Consumer is in natural environment . Flexible method to gauge consumer response to entirely new products and questions ; issues of interest to respondents can be identified without specific prior knowledge of specific questions to ask . Disadvantages Mail : Slow response rate .Telephone : cannot show stimuli ; can only ask a limited number of questions ;question answer option have to be repeated . Mall intercept : More expensive than most other survey research (but less cost than focus group and experiments) Online : Respondent often fail to read instructions. Expensive; difficult to set up; limited information collected in one setting . Cannot get at consumers thoughts; labor intensive and expensive . Expensive; unable to generalize from small sample size ;respondents are vulnerable to social influence so that answers are not independent. NOTE THAT THE TEXTBOOK SAYS THAT FOCUS GROUP COSTS ARE LOW. THIS IS NOT THE CASE FOR LARGE BUSINESSESS THAT USE
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Experimentation

Observation

Focus group

In-depth interviews

Projective Techniques

Physiological Measures

Online Search

Scanner Data

PROFESSIONAL SERVICES. Able to explore consumer Expensive; small sample feeling in dept ; more size; unable to generalize . independent than focus group . Useful in assessing topic Cumbersome about which respondent are not comfortable talking or motivations of which they may not be consciously aware . Able to pin point responses to stimuli over time ( and thus identify good and bad points of Expensive; cumbersome ads ) ; able to gauge feelings of which respondents may not be aware . Able to take advantage of Lack of respondent existing data ( e.g. search willingness to follow engine queries ; click instructions; concerns stream sequences ) about privacy; possible conditional branching ; response bias toward those able to customize more technically savvy questions ; recording is usually automatic . Able to identify which variables (e.g. sales , shelf placement , coupons ) Access to data may be affect behavior such as expensive; does not get purchase , brand Access to data may be switching. expensive; does not go at opinions, attitudes, and feelings underlying behavior. GENERALLY ONLY AVAILABLE FOR FREQUENTLY PURCHASED ITEMS; MOSTLY
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GROCERYE.G., FOOD, PAPER TOWELS, SOAP

Surveys are useful for getting a great deal of specific information. Surveys can contain open-ended questions (e.g., In which city and state were you born? ____________) or closed- ended , where the respondent is asked to select answers from a brief list (e.g., __Male ___ Female . Open ended questions have the advantage that the respondent is not limited to the options listed, and that the respondent is not being influenced by seeing a list of responses. However, open-ended questions are often skipped by respondents, and coding them can be quite a challenge. In general, for surveys to yield meaningful responses, sample sizes of over 100 are usually required because precision is essential. For example, if a market share of twenty percent would result in a loss while thirty percent would be profitable, a confidence interval of 20-35% is too wide to be useful. Surveys come in several different forms. Mail surveys are relatively inexpensive, but response rates are typically quite lowtypically from 5-20%. Phone-surveys get somewhat higher response rates, but not many questions can be asked because many answer options have to be repeated and few people are willing to stay on the phone for more than five minutes. Mall intercepts are a convenient way to reach consumers, but respondents may be reluctant to discuss anything sensitive face-to-face with an interviewer. Surveys, as any kind of research, are vulnerable to bias. The wording of a question can influence the outcome a great deal. For example, more people answered no to the question Should speeches against democracy be allowed? than answered yes to Should speeches against democracy be forbidden? For face-to-face interviews, interviewer bias is a danger, too. Interviewer bias occurs when the interviewer influences the way the respondent answers. For example, unconsciously an interviewer that works for the firm manufacturing the product in question may smile a little when something good is being said about the product and frown a little when something negative is being said. The respondent may catch on and say something more positive than his or her real opinion. Finally, a response bias may occurif only part of the sample responds to a survey, the respondents answers may not be representative of the population.

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Focus groups are useful when the marketer wants to launch a new product or modify an existing one. A focus group usually involves having some 8-12 people come together in a room to discuss their consumption preferences and experiences. The group is usually led by a moderator, who will start out talking broadly about topics related broadly to the product without mentioning the product itself. For example, a focus group aimed at sugar-free cookies might first address consumers snacking preferences, only gradually moving toward the specific product of sugar-free cookies. By not mentioning the product up front, we avoid biasing the participants into thinking only in terms of the specific product brought out. Thus, instead of having consumers think primarily in terms of what might be good or bad about the product, we can ask them to discuss more broadly the ultimate benefits they really seek. For example, instead of having consumers merely discuss what they think about some sugar-free cookies that we are considering releasing to the market, we can have consumers speak about their motivations for using snacks and what general kinds of benefits they seek. Such a discussion might reveal a concern about healthfulness and a desire for wholesome foods. Probing on the meaning of wholesomeness, consumers might indicate a desire to avoid artificial ingredients. This would be an important concern in the marketing of sugar-free cookies, but might not have come up if consumers were asked to comment directly on the product where the use of artificial ingredients is, by virtue of the nature of the product, necessary. Focus groups are well suited for some purposes, but poorly suited for others. In general, focus groups are very good for getting breadthi.e., finding out what kinds of issues are important for consumers in a given product category. Here, it is helpful that focus groups are completely open-ended: The consumer mentions his or her preferences and opinions, and the focus group moderator can ask the consumer to elaborate. In a questionnaire, if one did not think to ask about something, chances are that few consumers would take the time to write out an elaborate answer. Focus groups also have some drawbacks, for example:

They represent small sample sizes. Because of the cost of running focus groups, only a few groups can be run. Suppose you run four focus groups with ten members each. This will result in an n of 4(10)=40, which is too small to generalize from. Therefore, focus groups cannot give us a good idea of: What proportion of the population is likely to buy the product. What price consumers are willing to pay . The groups are inherently social. This means that: Consumers will often say things that may make them look good (i.e., they watch public television rather than soap operas or cook fresh meals for their families daily) even if that is not true.
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Consumers may be reluctant to speak about embarrassing issues (e.g., weight control, birth control).

Personal interviews involve in-depth questioning of an individual about his or her interest in or experiences with a product. The benefit here is that we can get really into depth (when the respondent says something interesting, we can ask him or her to elaborate), but this method of research is costly and can be extremely vulnerable to interviewer bias. To get a person to elaborate, it may help to try a common tool of psychologists and psychiatristssimply repeating what the person said. He or she will often become uncomfortable with the silence that follows and will then tend to elaborate. This approach has the benefit that it minimizes the interference with the respondents own ideas and thoughts. He or she is not influenced by a new question but will, instead, go more in depth on what he or she was saying. Personal interviews are highly susceptible to inadvertent signaling to the respondent. Although an interviewer is looking to get at the truth, he or she may have a significant interest in a positive consumer response. Unconsciously, then, he or she may inadvertently smile a little when something positive is said and frown a little when something negative is said. Consciously, this will often not be noticeable, and the respondent often will not consciously be aware that he or she is being reinforced and punished for saying positive or negative things, but at an unconscious level, the cumulative effect of several facial expressions are likely to be felt. Although this type of conditioning will not get a completely negative respondent to say all positive things, it may swing the balance a bit so that respondents are more likely to say positive thoughts and withhold, or limit the duration of, negative thoughts. Projective techniques are used when a consumer may feel embarrassed to admit to certain opinions, feelings, or preferences. For example, many older executives may not be comfortable admitting to being intimidated by computers. It has been found that in such cases, people will tend to respond more openly about someone else. Thus, we may ask them to explain reasons why a friend has not yet bought a computer, or to tell a story about a person in a picture who is or is not using a product. The main problem with this method is that it is difficult to analyze responses. Projective techniques are inherently inefficient to use. The elaborate context that has to be put into place takes time and energy away from the main question. There may also be real differences between the respondent and the third party. Saying or thinking about something that hits too close to home may also influence the respondent, who may or may not be able to see through the ruse.
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Observation of consumers is often a powerful tool. Looking at how consumers select products may yield insights into how they make decisions and what they look for. For example, some American manufacturers were concerned about low sales of their products in Japan. Observing Japanese consumers, it was found that many of these Japanese consumers scrutinized packages looking for a name of a major manufacturer the product specific-brands that are common in the U.S. (e.g., Tide) were not impressive to the Japanese, who wanted a name of a major firm like Mitsubishi or Proctor & Gamble. Observation may help us determine how much time consumers spend comparing prices, or whether nutritional labels are being consulted. A question arises as to whether this type of spying inappropriately invades the privacy of consumers. Although there may be cause for some concern in that the particular individuals have not consented to be part of this research, it should be noted that there is no particular interest in what the individual customer being watched does. The question is what consumerseither as an entire group or as segmentsdo. Consumers benefit, for example, from stores that are designed effectively to promote efficient shopping. If it is found that women are more uncomfortable than men about others standing too close, the areas of the store heavily trafficked by women can be designed accordingly. What is being reported here, then, are averages and tendencies in response. The intent is not to find juicy observations specific to one customer. The video clip with Paco Underhill that we saw in class demonstrated the application of observation research to the retail setting. By understanding the phenomena such as the tendency toward a right turn, the location of merchandise can be observed. It is also possible to identify problem areas where customers may be overly vulnerable to the but brush, or overly close encounter with others. This method can be used to identify problems that the customer experiences, such as difficulty finding a product, a mirror, a changing room, or a store employee for help. Online research methods. The Internet now reaches the great majority of households in the U.S., and thus, online research provides new opportunity and has increased in use. One potential benefit of online surveys is the use of conditional branching. In conventional paper and pencil surveys, one question might ask if the respondent has shopped for a new car during the last eight months. If the respondent answers no, he or she will be asked to skip ahead several questionse.g., going straight to question 17 instead of proceeding to number 9. If the respondent answered yes, he or she would be instructed to go to the next question which, along with the next several ones, would address issues related to this shopping experience. Conditional branching allows the computer to skip directly to the appropriate question. If a respondent is asked which brands he or she considered, it is also possible to customize brand comparison
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questions to those listed. Suppose, for example, that the respondent considered Ford, Toyota, and Hyundai, it would be possible to ask the subject questions about his or her view of the relative quality of each respective pairin this case, Ford vs. Toyota, Ford vs. Hyundai, and Toyota vs. Hyundai. There are certain drawbacks to online surveys. Some consumers may be more comfortable with online activities than othersand not all households will have access. Today, however, this type of response bias is probably not significantly greater than that associated with other types of research methods. A more serious problem is that it has consistently been found in online research that it is very difficultif not impossibleto get respondents to carefully read instructions and other information online there is a tendency to move quickly. This makes it difficult to perform research that depends on the respondents reading of a situation or product description. Online search data and page visit logs provides valuable ground for analysis. It is possible to see how frequently various terms are used by those who use a firms web site search feature or to see the route taken by most consumers to get to the page with the information they ultimately want. If consumers use a certain term frequently that is not used by the firm in its product descriptions, the need to include this term in online content can be seen in search logs. If consumers take a long, torturous route to information frequently accessed, it may be appropriate to redesign the menu structure and/or insert hyperlinks in intermediate pages that are found in many users routes. Scanner data. Many consumers are members of supermarket clubs. In return for signing p for a card and presenting this when making purchases, consumers are often eligible for considerable discounts on selected products. Researchers use a more elaborate version of this type of program in some communities. Here, a number of consumers receive small payments and/or other incentives to sign up to be part of a research panel. They then receive a card that they are asked to present any time they go shopping. Nearly all retailers in the area usually cooperate. It is now possible to track what the consumer bought in all stores and to have a historical record. The consumers shopping record is usually combined with demographic information (e.g., income, educational level of adults in the household, occupations of adults, ages of children, and whether the family owns and rents) and the familys television watching habits. (Electronic equipment run by firms such as A. C. Nielsen will actually recognize the face of each family member when he or she sits down to watch).

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It is now possible to assess the relative impact of a number of factors on the consumers choicee.g.,

What brand in a given product category was bought during the last, or a series of past, purchase occasions; Whether, and if so, how many times a consumer has seen an ad for the brand in question or a competing one; Whether the target brand (and/or a competing one) is on sale during the store visit; Whether any brand had preferential display space; The impact of income and/or family size on purchase patterns; and Whether a coupon was used for the purchase and, if so, its value.

A split cable technology allows the researchers to randomly select half the panel members in a given community to receive one advertising treatment and the other half another. The selection is truly random since each household, as opposed to neighborhood, is selected to get one treatment or the other. Thus, observed differences should, allowing for sampling error, the be result of advertising exposure since there are no other systematic differences between groups. Interestingly, it has been found that consumers tend to be more influenced by commercials that they zap through while channel surfing even if they only see part of the commercial. This most likely results from the reality that one must pay greater

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attention while channel surfing than when watching a commercial in order to determine which program is worth watching. Scanner data is, at the present time, only available for certain grocery item product categoriese.g., food items, beverages, cleaning items, laundry detergent, paper towels, and toilet paper. It is not available for most non-grocery product items. Scanner data analysis is most useful for frequently purchased items (e.g., drinks, food items, snacks, and toilet paper) since a series of purchases in the same product category yield more information with greater precision than would a record of one purchase at one point in time. Even if scanner data were available for electronic products such as printers, computers, and MP3 players, for example, these products would be purchased quite infrequently. A single purchase, then, would not be as effective in effectively distinguishing the effects of different factorse.g., advertising, shelf space, pricing of the product and competitors, and availability of a couponsince we have at most one purchase instance during a long period of time during which several of these factors would apply at the same time. In the case of items that are purchased frequently, the consumer has the opportunity to buy a product, buy a competing product, or buy nothing at all depending on the status of the brand of interest and competing brands. In the case of the purchase of an MP3 player, in contrast, there may be promotions associated with several brands going on at the same time, and each may advertise. It may also be that the purchase was motivated by the breakdown of an existing product or dissatisfaction or a desire to add more capabilities. Physiological measures are occasionally used to examine consumer response. For example, advertisers may want to measure a consumers level of arousal during various parts of an advertisement. This can be used to assess possible discomfort on the negative side and level of attention on the positive side. By attaching a tiny camera to plain eye glasses worn by the subject while watching an advertisement, it is possible to determine where on screen or other ad display the subject focuses at any one time. If the focus remains fixed throughout an ad sequence where the interesting and active part area changes, we can track whether the respondent is following the sequence intended. If he or she is not, he or she is likely either not to be paying as much attention as desired or to be confused by an overly complex sequence. In situations where the subjects eyes do move, we can assess whether this movement is going in the intended direction. Mind-reading would clearly not be ethical and is, at the present time, not possible in any event. However, it is possible to measure brain waves by attaching electrodes. These readings will not reveal what the subject actually thinks, but it is possible to distinguish
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between beta wavesindicating active thought and analysisand alpha waves, indicating lower levels of attention. An important feature of physiological measures is that we can often track performance over time. A subject may, for example, be demonstrating good characteristics such as appropriate level of arousal and eye movementduring some of the ad sequence and not during other parts. This, then, gives some guidance as to which parts of the ad are effective and which ones need to be reworked. In a variation of direct physiological measures, a subject may be asked, at various points during an advertisement, to indicate his or her level of interest, liking, comfort, and approval by moving a lever or some instrument (much like one would adjust the volume on a radio or MP3 player). Republican strategist used this technique during the impeachment and trial of Bill Clinton in the late 1990s. By watching approval during various phases of a speech by the former President, it was found that viewers tended to respond negatively when he referred to speaking truthfully but favorably when the President referred to the issues in controversy as part of his private life. The Republican researchers were able to separate average results from Democrats, Independents, and Republicans, effectively looking at different segments to make sure that differences between each did not cancel out effects of the different segments. (For example, if at one point Democrats reacted positively and Republicans responded negatively with the same intensity, the average result of apparent indifference would have been very misleading). Research sequence In general, if more than one type of research is to be used, the more flexible and less precise methodsuch as focus groups and/or individual interviewsshould generally be used before the less flexible but more precise methods (e.g., surveys and scanner data) are used. Focus groups and interviews are flexible and allow the researcher to follow up on interesting issues raised by participants who can be probed. However, because the sample sizes are small and because participants in a focus group are influenced by each other, few data points are collected. If we run five focus groups with eight people each, for example, we would have a total of forty responses. Even if we assume that these are independent, a sample size of forty would give very imprecise results. We might conclude, for example, that somewhere between 5% and 40% of the target market would be interested in the product we have to offer. This is usually no more precise than what we already reasonably new. Questionnaires, in contrast, are highly inflexible. It is not possible to ask follow-up questions. Therefore, we can use our insights from focus groups and interviews to develop questionnaires that contain specific questions that can be asked to a larger number of people. There will still be
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some sampling error, but with a sample size of 1,000+ responses, we may be able to narrow the 95% confidence interval for the percentage of the target market that is seriously interested in our product to, say, 17-21%, a range that is much more meaningful. Cautions Some cautions should be heeded in marketing research. First, in general, research should only be commissioned when it is worth the cost. Thus, research should normally be useful in making specific decisions (what size should the product be? Should the product be launched? Should we charge $1.75 or $2.25?) Secondly, marketing research can be, and often is, abused. Managers frequently have their own agendas (e.g., they either would like a product to be launched or would prefer that it not be launched so that the firm will have more resources left over to tackle their favorite products). Often, a way to get your way is to demonstrate through objective research that your opinions make economic sense. One example of misleading research, which was reported nationwide in the media, involved the case of The Pentagon Declares War on Rush Limbaugh. The Pentagon, within a year of the election of Democrat Bill Clinton, reported that only 4.2% of soldiers listening to the Armed Forces Network wanted to hear Rush Limbaugh. However, although this finding was reported without question in the media, it was later found that the conclusion was based on the question What single thing can we do to improve programming? If you did not write in something like Carry Rush Limbaugh, you were counted as not wanting to hear him.

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Indian Two-Wheeler Industry

A Dripto Mukhopadhyay, Associate Fellow, Perspective NCAER1

Automobile is one of the largest industries in global market. Being the leader in product and process technologies in the manufacturing sector, it has been recognized as one of the drivers of economic growth. During the last decade, well-directed efforts have been made to provide a new look to the automobile policy for realizing the sector's full potential for the economy. Steps like abolition of licensing, removal of quantitative restrictions and initiatives to bring the policy framework in consonance with WTO requirements have set the industry in a progressive track. Removal of the restrictive environment has helped restructuring, and enabled industry to absorb new technologies, aligning itself with the global development and also to realize its potential in the country. The liberalization policies have led to continuous increase in competition which has ultimately resulted in modernization in line with the global standards as well as in substantial cut in prices. Aggressive marketing by the auto finance companies have also played a significant role in boosting automobile demand, especially from the population in the middle income group.

Evolution

of

Two-wheeler

Industry

in

India

Two-wheeler segment is one of the most important components of the automobile sector that has undergone significant changes due to shift in policy environment. The two-wheeler industry has been in existence in the country since 1955. It consists of three segments viz. scooters, motorcycles and mopeds. According to the figures published by SIAM, the share of two-wheelers in automobile sector in terms of units sold was about 80 per cent during 2003-04. This high figure itself is suggestive of the importance of the sector. In the initial years, entry of firms, capacity expansion, choice of products including capacity mix and technology, all critical areas of functioning of an industry, were effectively controlled by the State machinery. The lapses in the system had invited fresh policy options that came into being in late sixties. Amongst these policies, Monopolies and Restrictive Trade Practices (MRTP) and Foreign Exchange Regulation Act (FERA) were aimed at regulating monopoly and foreign investment respectively. This controlling mechanism over the industry resulted in: (a) several firms operating below minimum scale of efficiency; (b) under-utilization of capacity; and (c) usage of outdated technology. Recognition of the damaging effects of licensing and fettering policies led to initiation of reforms, which ultimately took a more prominent shape with the introduction of the New Economic Policy (NEP) in 1985.
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However, the major set of reforms was launched in the year 1991 in response to the major macroeconomic crisis faced by the economy. The industrial policies shifted from a regime of regulation and tight control to a more liberalized and competitive era. Two major results of policy changes during these years in two-wheeler industry were that the, weaker players died out giving way to the new entrants and superior products and a sizeable increase in number of brands entered the market that compelled the firms to compete on the basis of product attributes. Finally, the two-wheeler industry in the country has been able to witness a proliferation of brands with introduction of new technology as well as increase in number of players. However, with various policy measures undertaken in order to increase the competition, though the degree of concentration has been lessened over time, deregulation of the industry has not really resulted in higher level of competition.

Growth

Perspective

The composition of the two-wheeler industry has witnessed sea changes in the post-reform period. In 1991, the share of scooters was about 50 per cent of the total 2-wheeler demand in the Indian market. Motorcycle and moped had been experiencing almost equal level of shares in the total number of two-wheelers. In 2003-04, the share of motorcycles increased to 78 per cent of the total two-wheelers while the shares of scooters and mopeds declined to the level of 16 and 6 per cent respectively. A clear picture of the motorcycle segment's gaining importance during this period is exhibited by the Figures 1, 2 and 3 depicting total sales, share and annual growth during the period 1993-94 through 2003-04. National Council of Applied Economic Research (NCAER) had forecast two-wheeler demand during the period 2002-03 through 2011-12. The forecasts had been made using econometric technique along with inputs obtained from a primary survey conducted at 14 prime cities in the country. Estimations were based on Panel Regression, which takes into account both time series and cross section variation in data. A panel data of 16 major states over a period of 5 years ending 1999 was used for the estimation of parameters. The models considered a large number of macro-economic, demographic and socio-economic variables to arrive at the best estimations for different two-wheeler segments. The projections have been made at all India and regional levels. Different scenarios have been presented based on different assumptions regarding the demand drivers of the two-wheeler industry. The most likely scenario assumed annual growth rate of Gross Domestic Product (GDP) to be 5.5 per cent during 2002-03 and was anticipated to increase gradually to 6.5 per cent during 2011-12. The all-India and region-wise projected growth trends for the motorcycles and scooters are presented in Table 1. The demand for mopeds is not presented in this analysis due to its already shrinking status compared to' motorcycles and scooters.
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It is important to remember that the above-mentioned forecast presents a long-term growth for a period of 10 years. The high growth rate in motorcycle segment at present will stabilize after a certain point beyond which a condition of equilibrium will set the growth path. Another important thing to keep in mind while interpreting these growth rates is that the forecast could consider the trend till 1999 and the model could not capture the recent developments that have taken place in last few years. However, this will not alter the regional distribution to a significant extent. Table 1 suggests two important dimensions for the two-wheeler industry. The region-wise numbers of motorcycle and scooter suggest the future market for these segments. At the all India level, the demand for motorcycles will be almost 10 times of that of the scooters. The same in the western region will be almost 20 times. It is also evident from the table that motorcycle will find its major market in the western region of the country, which will account for more than 40 per cent of its total demand. The south and the north-central region will follow this. The demand for scooters will be the maximum in the northern region, which will account for more than 50 per cent of the demand for scooters in 2011-12.

Table 1: Demand Forecast for Motorcycles and Scooters for 2011-12 2-Wheeler Segment Regions South West North-Central Motorcycle Scooter 2835 4327 2624 (12.9) (16.8) (12.5) 203 (2.6) 219 (3.5) 602 (2.8) East & North-East 883 (11.1) 99 (2.0) All India 10669 (14.0) 1124 (2.08)

Note: Compound Annual Rate of Growth during 2002-03 and 2011-12 is presented in parenthesis Source: Indian Automobile Industry: Optimism in the Air, Industry Insight, NCAER

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The present economic situation of the country makes the scenario brighter for short-term demand. Real GDP growth was at a high level of 7.4 per cent during the first quarter of 2004. Both industry and the service sectors have shown high growth during this period at the rates of 8.0 and 9.5 per cent respectively. However, poor rainfall last year will pull down the GDP growth to some extent. Taking into account all these factors along with other leading indicators including government spending, foreign investment, inflation and export growth, NCAER has projected an average growth of GDP at 6.7 per cent during the tenth five-year plan. Its mid-term forecast suggests an expected growth of 7.4 per cent in GDP during 2004-05 to 2008-09. Very recently, IMF has portrayed a sustained global recovery in World Economic Outlook. A significant shift has also been observed in Indian households from the lower income group to the middle income group in recent years. The finance companies are also more aggressive in their marketing compared to previous years. Combining all these factors, one may visualize a higher growth rate in twowheeler demand than presented in Table 1, particularly for the motorcycle segment. There is a large untapped market in semi-urban and rural areas of the country. Any strategic planning for the two-wheeler industry needs to identify these markets with the help of available statistical techniques. Potential markets can be identified as well as prioritised using these techniques with the help of secondary data on socio-economic parameters. For the twowheeler industry, it is also important to identify the target groups for various categories of motorcycles and scooters. With the formal introduction of secondhand car market by the reputed car manufacturers and easy loan availability for new as well as used cars, the twowheeler industry needs to upgrade its market information system to capture the new market and to maintain its already existing markets. Availability of easy credit for two-wheelers in rural and smaller urban areas also requires more focused attention. It is also imperative to initiate measures to make the presence of Indian two-wheeler industry felt in the global market. Adequate incentives for promoting exports and setting up of institutional mechanism such as Automobile Export Promotion Council would be of great help for further surge in demand for the Indian two-wheeler industry.

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Objectives
Market Perception a) Customer preference and their image about Baja auto product and services. b) As Bajaj as slipped down from 2nd to 3rd position in automobile industry so I would like to know how a consumer perceives its product. c) Customer reaction and awareness about existing Brand and there attitudes (Strength and weakness )

Market Potential a) Opportunity in various market segments (institutional cell ) which can serve future demand and probably market scope of Bajaj auto products and services .

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Chapter 2
Literature Review
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Terminology
The distal stimulus (or distal object), the proximal stimulus, and percept are three concepts used to describe perception. The distal stimulus is the object as it exists in the real world. The proximal stimulus registers (onto sensory receptors) the information given by the distal stimulus, and may also refer to the neural activity which results from this stimulation. A mental recreation of the distal stimulus in the mind of the perceiver is the percept. Perception is sometimes described as the process of constructing mental representations of distal stimuli using the information available in proximal stimuli. An example would be a person looking at a shoe on the floor. The shoe itself is the distal stimulus. When light from the shoe enters a person's eye and stimulates their retina, that stimulation is the proximal stimulus .The image of the shoe reconstructed by the brain of the person is the percept. Another example would be a telephone ringing. The ringing of the telephone is the distal stimulus. The sound stimulating a person's auditory receptors is the proximal stimulus, and the brain's interpretation of this as the ringing of a telephone is the percept. The different kinds of sensation such as warmth, sound, and taste are called "sensory modalities". Stimuli are not necessarily translated into a percept and rarely does a single stimulus translate into a percept. Also, absence of adequate stimuli may be translated into multiple percepts, experienced randomly, one at a time, in what is called "multi-stable perception". And the same stimuli, or absence of them, may result in different percepts depending on subjects culture and previous experien ces. Ambiguous figures demonstrate that a single stimulus can result in more than one percept; for example the Rubin vase which can be interpreted either as a vase or as two faces. The percept can bind sensations from multiple senses into a whole. A picture of a talking person on a television screen, for example, is bound to the sound of speech from speakers to form a percept of a talking person. "Percept" is also a term used by Leibniz, Bergson, Deleuze and Guattari to define perception independent from perceivers.

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Perception and reality

In the case of visual perception, some people can actually see the percept shift in their mind's eye. Others, who are not picture thinkers, may not necessarily perceive the 'shape-shifting' as their world changes. The 'esemplastic' nature has been shown by experiment: an ambiguous image has multiple interpretations on the perceptual level. This confusing ambiguity of perception is exploited in human technologies such as camouflage, and also in biological mimicry, for example by European Peacock butterflies, whose wings bear eye markings that birds respond to as though they were the eyes of a dangerous predator. Perceptual ambiguity is not restricted to vision. For example, recent touch perception research Robles-De-La-Torre & Hayward 2001 found that kinesthesia based haptic perception strongly relies on the forces experienced during touch. There is also evidence that the brain in some ways operates on a slight "delay", to allow nerve impulses from distant parts of the body to be integrated into simultaneous signals. Perception is one of the oldest fields in psychology. The oldest quantitative law in psychology is the Weber-Fechner law, which quantifies the relationship between the intensity of physical stimuli and their perceptual effects (for example, testing how much darker a computer screen can get before the viewer actually notices). The study of perception gave rise to the Gestalt school of psychology, with its emphasis on holistic approach.

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Theories
Perception as hypothesis-testing Cognitive theories of perception assume there is a poverty of stimulus. This (with reference to perception) is the claim that sensations are, by themselves, unable to provide a unique description of the world. Sensations require 'enriching', which is the role of the mental model. A different type of theory is the perceptual ecology approach of James J. Gibson. Gibson rejected the assumption of a poverty of stimulus by rejecting the notion that perception is based in sensations. Instead, he investigated what information is actually presented to the perceptual systems. He and the psychologists who work within this paradigm detailed how the world could be specified to a mobile, exploring organism via the lawful projection of information about the world into energy arrays. Specification is a 1:1 mapping of some aspect of the world into a perceptual array; given such a mapping, no enrichment is required and perception is direct perception.

Perception-in-action An ecological understanding of perception derived from Gibson's early work is that of "perception-in-action", the notion that perception is a requisite property of animate action; that without perception action would be unguided, and without action perception would serve no purpose. Animate actions require both perception and motion, and perception and movement can be described as "two sides of the same coin, the coin is action". Gibson works from the assumption that singular entities, which he calls "invariants", already exist in the real world and that all that the perception process does is to home in upon them. A view known as constructivism (held by such philosophers as Ernst von Glasersfeld) regards the continual adjustment of perception and action to the external input as precisely what constitutes the "entity", which is therefore far from being invariant. Glasersfeld considers an "invariant" as a target to be homed in upon, and a pragmatic necessity to allow an initial measure of understanding to be established prior to the updating that a statement aims to achieve. The invariant does not and need not
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represent an actuality, and Glasersfeld describes it as extremely unlikely that what is desired or feared by an organism will never suffer change as time goes on. This social constructionist theory thus allows for a needful evolutionary adjustment. A mathematical theory of perception-in-action has been devised and investigated in many forms of controlled movement, and has been described in many different species of organism using the General Tau Theory. According to this theory, tau information, or time-to-goal information is the fundamental 'percept' in perception.

Effect of motivation and expectation

A perceptual set, also called perceptual expectancy or just set is a predisposition to perceive things in a certain way. It is an example of how perception can be shaped by "top-down" processes such as drives and expectations. Perceptual sets occur in all the different senses. They can be long term, such as a special sensitivity to hearing one's own name in a crowded room, or short term, as in the ease with which hungry people notice the smell of food. A simple demonstration of the effect involved very brief presentations of non-words such as "sael". Subjects who were told to expect words about animals read it as "seal", but others who were expecting boat-related words read it as "sail". Sets can be created by motivation and so can result in people interpreting ambiguous figures so that they see what they want to see. For instance, how someone perceives what unfolds during a sports game can be biased if they strongly support one of the teams. In one experiment, students were allocated to pleasant or unpleasant tasks by a computer. They were told that either a number or a letter would flash on the screen to say whether they were going to taste an orange juice drink or an unpleasant-tasting health drink. In fact, an ambiguous figure was flashed on screen, which could either be read as the letter B or the number 13. When the letters were associated with the pleasant task, subjects were more likely to perceive a letter B, and when letters were associated with the unpleasant task they tended to perceive a number 13. Perceptual set has been demonstrated in many social contexts. People who are primed to think of someone as "warm" are more likely to perceive a variety of positive characteristics in them, than if the word "warm" is replaced by "cold". When someone has a reputation for being funny, audience are more likely to find them
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amusing. Individual's perceptual sets reflect their own personality traits. For example, people with an aggressive personality are quicker to correctly identify aggressive words or situations. Preconceptions can influence how the world is perceived. For example, one classic psychological experiment showed slower reaction times and less accurate answers when a deck of playing cards reversed the color of the suit symbol for some cards (e.g. red spades and black hearts). The processes of perception routinely alter what humans see. When people view something with a preconceived concept about it, they tend to take those concepts and see them whether or not they are there. This problem stems from the fact that humans are unable to understand new information, without the inherent bias of their previous knowledge. A persons knowledge creates his or her reality as much as the truth, because the human mind can only contemplate that to which it has been exposed. When objects are viewed without understanding, the mind will try to reach for something that it already recognizes, in order to process what it is viewing. That which most closely relates to the unfamiliar from our past experiences, makes up what we see when we look at things that we dont comprehend. Philosopher Andy Clark explains that perception, although it occurs quickly, is not simply a bottom-up process (where minute details are put together to form larger wholes). Instead, our brains use what he calls predictive coding. It starts with very broad constraints and expectations for the state of the world, and as expectations are met, it makes more detailed predictions (errors lead to new predictions , or learning processes). Clark says this research has various implications; not only can there be no completely "unbiased, unfiltered" perception, but this means that there is a great deal of feedback between perception and expectation (perceptual experiences often shape our beliefs, but those perceptions were based on existing beliefs).

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Chapter 3 Company Profile

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The Company

The Bajaj Group is amongst the top 10 business houses in India. Its footprint stretches over a wide range of industries, spanning automobiles (two-wheelers and three-wheelers), home appliances, lighting, iron and steel, insurance, travel and finance. The group's flagship company, Bajaj Auto, is ranked as the world's fourth largest two- and three- wheeler manufacturer and the Bajaj brand is well-known across several countries in Latin America, Africa, Middle East, South and South East Asia. Founded in 1926, at the height of India's movement for independence from the British, the group has an illustrious history. The integrity, dedication, resourcefulness and determination to succeed which are characteristic of the group today, are often traced back to its birth during those days of relentless devotion to a common cause. Jamnalal Bajaj, founder of the group, was a close confidant and disciple of Mahatma Gandhi. In fact, Gandhiji had adopted him as his son. This close relationship and his deep involvement in the independence movement did not leave Jamnalal Bajaj with much time to spend on his newly launched business venture. His son, Kamalnayan Bajaj, then 27, took over the reigns of business in 1942. He too was close to Gandhiji and it was only after Independence in 1947, that he was able to give his full attention to the business. Kamalnayan Bajaj not only consolidated the group, but also diversified into various manufacturing activities. The present Chairman of the group, Rahul Bajaj, took charge of the business in 1965. Under his leadership, the turnover of the Bajaj Auto the flagship company has gone up from INR.72 million to INR. 120 billion, its product portfolio has expanded and the brand has found a global market. He is one of Indias most distinguished business leaders and internationally respected for his business acumen and entrepreneurial spirit.
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Company Analysis

Bajaj Auto Ltd. (BAJAJ AUTOMOBILE LIMITED) is one of the oldest and the largest manufacturer of automobiles in India and has been the market leader in scooters. In 1990s, the near monopolistic market structure, perhaps, lulled the company into being complacent and they gave way to the competitors like Hero Honda and TVS. Hero Honda and TVS Suzuki tied up with foreign majors to bring in the latest in terms of aesthetics and technology, and Bajaj failed to gauge the changing tastes of consumers. In 1990s, there was a marked shift in customer preference from scooters to motorcycles. Bajaj found itself at a loss here, as this was largely an unchartered territory. Here in this work, I started with the industry analysis, company analysis, portfolio analysis, and then moved on to exploring the strategies adopted by BAJAJ
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AUTOMOBILE LIMITED to reinvent itself and once again become a market force to reckon with in the Indian two-wheeler industry. Bajaj Auto is the flagship of the Bajaj Group of Companies. Bajaj is currently India's largest two- and three-wheeler manufacturer and one of the biggest in the world. Bajaj has long left behind its annual turnover of Rs. 72 million (1968), to currently register an impressive figure of Rs. 81.06 billion. Current Situation & Current Performance BAJAJ AUTOMOBILE LIMITED is currently outperforming the industry growth rate in twowheeler segment with 32% growth in year 2004-05 v/s industry growth of 19%. Market share in Motorcycles is improving with every passing year. It has also increased from 28% in 2004-05 to 31% in 2005-06. Annual turnover for the year 2005-06 is Rs. 81.06 billion v/s Rs. 63.23 billion a year before - an increase of 28% which is very healthy. BAJAJ AUTOMOBILE LIMITED has significant presence in all the three basic segments Price Segment, Value Segment and Performance Segment - and has been showing increased sales in all the segments over years. Besides this, BAJAJ AUTOMOBILE LIMITED is a market leader in two-wheeler exports and it consists a great chunk of there overall revenues. Currently, BAJAJ AUTOMOBILE LIMITED is selling over 1 lac motorcycles annually in Sri Lanka, further, they are commanding 50% market share in Central America.

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Profile Change in Indian Two-Wheeler Industry The demand shift from scooters to motorcycles in the 1990s was without parallel in any comparable product category in India. This was mainly attributed to the change in customers' preference towards fuel-efficient and aesthetically appealing models, which scooter manufacturers failed to provide. The delayed launch of new, advanced scooter models, fear of four-stroke scooters being prone to increased skidding risks and vibrations, and the difficulty of maintenance also contributed to this shift.

Interestingly, the growth in the motorcycle segment was mainly driven by the demand from rural and semi-urban consumers. An estimated 60% of the demand for motorcycles came from rural and semi-urban customers.

The rise in their disposable incomes on account of good monsoons in the 1990s provided the normally conservative rural and semi-urban customers with extra money that induced them to experiment with new, innovative products.

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Shift from Scooter to Motorcycle

Advanced technology, larger wheelbase, higher ground clearance and the ability to ride on bad roads with less effort and less danger of skidding and decreased maintenance cost were the other factors that encouraged customers to choose motorbikes over other two-wheelers.

Supplier Bargaining Power Suppliers of auto components are fragmented and are extremely critical for this industry since most of the component work is outsourced. Proper supply chain management is a costly yet critical need.

Buyer's Bargaining Power Buyers in automobile market have more choice to choose from and the increasing competition is driving the bargaining power of customers uphill. With more models to choose from in almost all categories, the market forces have empowered the buyers to a large extent.

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Industry Rivalry The industry rivalry is extremely high with any product being matched in a few months by competitor. This instinct of the industry is primarily driven by the technical capabilities acquired over years of gestation under the technical collaboration with international players.

Threats of Substitutes

There is no perfect substitute to this industry. Also, if there is any substitute to a twowheeler, Bajaj has presence in it. Cars, which again are a mode of transport, do never directly compete or come in consideration while selecting a two-wheeler, cycles do never even compete with the low entry level moped for even this choice comes at a comparatively higher economic potential. Summarizing the industry analysis, it can be said that the two-wheeler market is attractive as it scores well on three out of five categories.

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SWOT Analysis
Let's analyze the position of Bajaj in the current market set-up, evaluating its strengths, weaknesses, threats and opportunities available.

Strengths "Bajaj" is a well established Brand name in the scooter segment. Bajaj Auto is a cost-effective producer in the two wheeler market. It has a huge market share in the scooter segment of the two-wheeler industry. This acts as a cushion for the company in their efforts of foraying into the motorcycle segment. Bajaj has established a wide distribution network for the scooter segment which will favor them in their efforts in the motorcycle segment. Marketing has been a strength for Bajaj since inception. Weaknesses Bajaj has become a generic name associated with the scooters and that needs to be changed in the minds of the consumers before it could expect a great success in the motorcycle segment. Bajaj is dependent on its foreign counterparts for technological support. This needs to be addressed as it might be crucial when the foreign players enter the Indian market directly. Threats The market share in the scooter segment has taken a beating from TVS Suzuki's entry into this segment.
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Entry of Multinational companies, especially Chinese ones, in the motorcycle segment will stiffen the competition and will hamper the efforts of Bajaj to establish itself in the motorcycle segment Opportunities The motorcycle segment is expected to grow at a considerable rate and this would provide a good opportunity for Bajaj Auto to increase its market share in this segment. Kawasaki of Japan, when it comes to India, can help Bajaj enhance its product portfolio in the motorcycle segment as Kawasaki plans to use Bajaj's manufacturing base for its global operations. The Inevitable Change Bajaj on internal analysis found that it lacked 1. 2. 3. The technical expertise to deliver competitive goods. The design know-how. And the immediate inability to support the onslaught of competitors.

All these forced Bajaj to look for an international partner who could bring in technology and also offer some basic platforms to be manufactured and marketed in India. Kawasaki of Japan is a world-renowned manufacturer of high performance bikes. Bajaj entered into a strategic tie-up with Kawasaki in late 1990s to enhance its product line and knowledge up-gradation to support long-term strategies. This served the purpose of sustaining the market competition for a while. From 1996 to 2000, Bajaj invested hugely in infrastructure while simultaneously developing product design and innovation capabilities, which is the prime reason behind the energetic Bajaj of 21st century. Bajaj introduced a slew of products right from entry-level motorcycle to the high premium segment right from 2001 onwards, and since then its raining success all the way for Bajaj. Last quarter, Bajaj had impressive performance growing at a rate of 20%+ when the largest manufacturer grew at just 6%. This stands a testimony to the various important strategic decisions over the past decade.
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Strategies & Implementation

Over the next few months, the company will set-up separate sales channels for every segment of its business and consumers. Bajaj Auto's entire product portfolio, from the entry-level to the premium, is being sold by the same dealers. The restructuring will involve separate dealer networks catering to the urban and rural markets as well as its three-wheeler and premium bikes segments.

Bajaj Auto also plans to set-up an independent network of dealers for the rural areas. The needs of financing, selling, distribution and even after-sales service are completely different in the rural areas and do not makes sense for city dealers to control this. The company also plans to set-up exclusive dealerships for its three-wheeler products instead of having them sold through an estimated 300 of its existing dealers. Other Strategic Issues Cash is strength - Bajaj Auto has been sitting on a cash pile for over five years now. Over the next couple of years, competition in the two-wheeler market is set to intensify. TVS Motors and Hero Honda are on a product expansion binge. To fight this battle and retain its hard-earned market share in the motorcycle segment, Bajaj Auto will need its cash muscle. A look at its own story over the past five years provides valuable insight. Delisting worry - What is worrying is that there is an idea to delist the investment company (also an indirect indication that it would be listed initially). This would be closing the valve of equitable ownership distribution. There is a hint of a buyback of shares of the investment company as this is the only way it can be delisted. The company would not be short of cash to put through such a buyback. Factors such as low valuation, low trading interest and the need to provide shareholders may be cited as plausible reasons for the buyback. Stake for Kawasaki - Bajaj Auto's attempt to vest the surplus cash in a separate
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company may be a prelude to offering a stake to Kawasaki of Japan in the equity of the automobile company. The latter has been playing an increasingly active role in Bajaj's recent models, and its brand name is also more visible in Bajaj bikes than in the past. Better value proposition - Shareholder interests may be better served if the cash is retained to pursue growth in a tough market. This would also obviate the need to forkout fancy sums as stamp duty to the government for the de-merger. A combination of a large one-time dividend and a regular buyback program through the tender route may offer better value. A strategic stake for Kawasaki would only positively influence the stock's valuation.

Strategies for the Overseas Markets

Bajaj Auto looks at external markets primarily with three strategies 1) A market where all BAJAJ AUTOMOBILE LIMITED need to do is distribute through CKD or CBU routes. 2) Markets where BAJAJ AUTOMOBILE LIMITED need to create new products.

3) Markets where BAJAJ AUTOMOBILE LIMITED need to enter with existing products and probably with a good distributor or a production facility or a joint venture. Earlier, most of the products that Bajaj exported were scooters and some motorcycles. However, in its target markets, like in India, the shift was towards motorcycles. With the expansion in Bajaj's own range to almost five-six platforms of motorcycles, it had a better offering to export, also the reason for its stronger showing. For the last fiscal, 60 per cent of its exports were two-wheelers and the rest three-wheelers. Of the twowheeler exports, close to 90 per cent were motorcycles. Bajaj has identified certain key markets, which hold potential. Its first overseas office established at the Jebel Ali free trade zone has been the focal point for exports to middle Africa and the Saharan nations. Egypt and Iran also continue to be strong markets for Bajaj.

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The other market, which would be a focus area, is South America, where the company feels it is fairly well represented in most countries, except in Brazil, the largest market. The company recently participated in a large auto exhibition in Brazil and found good consumer acceptance to products like Pulsar and Wind 125. The other focus area is the ASEAN nations, which constitute the third biggest consumer of two-wheelers. The biggest among them is Indonesia, where Bajaj distributors are looking to introduce ecofriendly four-stroke auto rickshaws. But two-wheeler market requires great deal of effort from BAJAJ AUTOMOBILE LIMITED. Everybody is there with Honda leading the show. There's Suzuki, Kawasaki and some Korean and Chinese models. BAJAJ AUTOMOBILE LIMITED should look at the right product mix for two-wheelers. Bajaj's Pulsar model has taken off well there. It also wants to develop a new step-through model for the Indonesian market, but for now it will create a base there with its motorcycle models. Bajaj has also made a beginning by selling bikes in the Philippines branded in the name of its technical partner, Kawasaki. The two signed an MoU in February. Kawasaki, a large multi-product conglomerate, only makes high-end bikes and does not have sub-200cc models. Kawasaki is marketing the new model, Wind 125, developed by both companies, in the Philippines. The Bajaj-developed models, Caliber and Byk, which is a fuel-efficient bike, are also being distributed by Kawasaki. This is a good beginning strategically for Kawasaki to evince interest in Bajaj products for markets which can still buy less than 150 cc.

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Chapter 4

Analyzing and Data Interpretation

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Management Discussion and Analysis

Rahul Bajaj

Madhur Bajaj

As we know, 2008-09 was a very difficult year for the world economy. The stock, money and financial markets crashed, and with it the real sectors, in what was the worst global depression since the 1930s. Every developed country suffered negative GDP growth. And with it , economic and social pain. Among the major emerging markets, China and India continued to grow but at significantly lower rates. In India, for instance, after three consecutive years of growing at over 9%, GDP growth fell to 6.7% in 2008-09. Demand growth reduced sharply across all sectors; in many to the negative territory. Discretionary purchases were hit the hardest. It is not surprising, therefore, that automobile and two-wheeler sales tapered off. The good news for China and India was that the two emerging market giants shrugged off the downturn remarkably quickly. After three quarters of declining growth, both nations stemmed the rot, and got back into their stride. To be sure, GDP growth was muted compared to the past. However, for China to achieve 8.7% in 2009 and India to record 7.2% to 7.5% GDP growth in 2009-10 says a great deal about the capabilities of these two nations in steering through the crisis. In India, growth has been particularly robust in the two-wheeler market, which increased in volume by 24% in 2009-10. Bajaj Auto Limited (Bajaj Auto, BAL or the Company) did very well. It sold over 2.5 milli on motorcycles and, in doing so, the Company earned 21.7% EBITDA margin, which was the highest in the industry. Bajaj Autos performance highlights for 2009 -10 are given below:
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Highlights for 2009-10 versus 2008-09 : Bajaj Auto standalone 2009-10 has been a record year for Bajaj Auto in terms of highest ever sales, exports, profits and margins. 1 ) Net sales and other operating income grew by 35% to Rs.119.21 billion. 2) The year saw record sales of 2.85 million units over 2.5 million motorcycles and 340,937 three-wheelers. 3) Exports rose by 15% to 891,002 units. 4) The Companys operating EBITDA stood at Rs.25.93 billion a growth of 116% over last year. The operating EBITDA margin was 21.7% of net sales and other operating income for 2009-10. 5) Operating profit before tax (PBT) grew by 170% to Rs.22.89 billion. 6) Profit after tax (PAT) grew by 160% to Rs.17.03 billion. 7) Surplus cash and cash equivalents in the Companys balance sheet as on 31 March 2010 stood at Rs.32.6 billion, versus Rs.9.3 billion on 31 March 2009.

It needs to be emphasized that the Companys excellent operational and financial performance is not merely due to increasing overall growth in motorcycle demand in India. Over the last few years, Bajaj Auto has been developing a brand-centred strategy. The front end is guided by the Companys strategy of differentiation, to continuously specialize its brand positioning in motorcycles. In the process, Bajaj Auto has positioned its motorcycle brands in the utility, price, value and sports categories. The basic proposition is that while products may generate market share, it is brands that provide pricing power and create higher profits. The back end - R&D, quality, production efficiency, logistics and throughput is guided by TPM, which the Company calls The Prime Mover towards excellence. 2009-10 saw the coming together of the front end and the back-end. It is this alignment which has resulted in Bajaj Auto growing faster than the market, gaining market share, and earning the highest profit rate in the industry.
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Markets
Motorcycles : Overall There are two tales of motorcycles in India. The first is well known: the steady growth of motorcycle sales throughout the country, and its overwhelming dominance in the twowheeler market. Chart A plots the data. As Chart A shows, from 7.10 million units in 2006-07, motorcycle sales fell to 6.54 million units in 2marginally to 6.81 million units in 2008-09. The year under review has been outstanding. Sales has increased by 24.1% the best ever growth since 2002-03, and over a much higher base. Indeed, sales in 200910 was 18.9% higher than even the previous peak during 2006-07. Motorcycles continue to account for over 80% of total two-wheeler sales. For the Company, therefore, it is the two-wheeler that matters. How has Bajaj Auto fared? Table 1 gives the data for the last seven years.007-08, and then rose very marginally to 6.81 million units in 2008-09. The year under review has been outstanding. Sales has increased by 24.1% the best ever growth since 2002-03, and over a much higher base. Indeed, sales in 2009-10 was 18.9% higher than even the previous peak during 2006-07. Motorcycles continue to account for over 80% of total two-wheeler sales. For the Company, therefore, it is the two-wheeler that matters. Chart A: Industrys sale of Two-Wheelers (Domestic + Exports)

Chart Title
12 10 8 6 4 2 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Other two wheelers Motorcycles

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The Company sold over 2.5 million motorcycles in India and the rest of the world. It increased its sales by 31.4% or 7.3 percentage points higher than the market as a whole, i.e. domestic sales plus exports of motorcycle of all manufacturers in India. Table 2 gives movement in market share for domestic motorcycles. Here, too, Bajaj Autos motorcycle sales in 2009-10 Grew faster than the market 39.7% for the Company, versus 25.8% in the aggregate.

Motorcycles : Domestic Sales Chart A does not, however, underscore the second tale of motorcycles. This is the story of the changing preference of Indian consumers. It needs some explanation. Over the last five years, the Companys management has been communicating about the change in consumer preferences for motorcycles. The gist of it has been: a ) Indian consumers - urban as well as a rural - have become better off. They have been enjoying greater purchasing power than before; and have begun to demand greater design inputs, better looks, feel, comfort and adventure for the products that they buy. And are willing to pay for these attributes. b) As a consequence, the consumers are upgrading. Across the board, a motorcycle is becoming a lifestyle statement. Boring and fuel efficient no longer works; exciting and fuel efficient does rapidly so, in ever increasing strides. c) In addition, there is a growing body of motor-bike users who want to purchase powerful models for the pure thrill of biking. The data prove this very clearly. Consider the following product segmentation: d) Commuter Standard (STD): Comprising Bajaj Autos Platina; Hero Hondas CD series; and TVS Star. e) Commuter Deluxe (DLX): The key brands here are Bajaj Autos Discover; Hero Hondas Splendor, Passion and Glamour; Honda Motorcycle & Scooters Indias (HMSIs) Shine; and TVS Fiero. f) Sports: This includes Bajaj Autos Pulsar; Hero Hondas CBZ, Hunk and Karizma; HMSIs Unicorn and Stunner; TVSs Apache; and Yamahas R15 and FZ16. How do the market shares of these categories stack up in India?
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Commuter STD The share of this bottom-of-the-pyramid category has been falling steadily, as Chart B1 shows. For India as a whole, the share of Commuter STD motorcycles has fallen year after year, from 43% of the market (in terms of volume) in 2005-06 to 19% in 2009-10. So, too, has Bajaj Autos composition: from 54% of the Companys total sales in 2005-06 to 24% in 2009-10. It is not just a matter of falling segment share. The Commuter STD category comprises low pricing power, low margin, low profit products. Bajaj Auto believes that there is more brand premium to be reaped and higher profits generated by being a significant player or leader in the other two categories. Commuter DLX Unlike the Commuter STD segment, this category is not only growing every year, but also constitutes the major chunk of Indias motorcycle market. Chart B2 plots the data. From a high base of 48% of the market in 2005-06, the Consumer DLX segment has grown to 64% in 2009-10 or close to two-thirds of the total number of bikes sold. Bajaj Auto, through its Discover DTS-Si, has increased its presence from 25% of the total number of motorcycles sold by the Company in 2005-06 to 45% in 2009-10. With the launch of Bajaj Autos Discover DTS-Si, the Company is selling an average of 80,000 vehicles per month in this category. Discover is now a one million plus brand.

Chart B2: Segment share, Deluxe Commuter Bikes

n India, Commutet DLX n BAL, Commuter DLX

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Sports This segment is showing rapid growth. From 9% market share in 2005-06, it has risen to 17% in 2009-10. According to many, this will be the fastest growing segment in the times to come, given the disproportionate growth of purchasing power in the hands of middle-class urban India, especially age group of 20-30 years. With its Pulsar range, Bajaj Auto has grown faster from 21% of its total volume of motorcycles in 2005-06 to 31% in 2009-10. Bajaj Auto is the clear market leader in this category. Chart B3 plots the data.

Chart B3: Segment share, Sports Bikes

This is an exciting segment in more ways than one. It is about aspiration; power; freedom; enjoyment; and the sheer pleasure of riding a great bike. The Company believes that for India as a whole, the segment will continue increasing its share of the market; and so too will Bajaj Auto. In this category, the new Pulsar 135 LS has been very successful in the market. Designed in the Pulsar character of aggression, the bike has been crafted with an eye to detail. Its light sports nature has bought more people into Pulsar fold, who would otherwise have been intimidated by the full size Pulsars. Together with the 135 LS, the Pulsar will also become a one million brand. The strategic shift in favor of the bigger and sportier Discover and Pulsar models has not only created a powerful image for the Companys offerings, but also generated higher margins.

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Motorcycles: Awards Bajaj Auto has won several awards for its motorcycles in the course of the year recognition of the Companys commitment to brands, adver tising, technology and product appeal. These are given below:

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Exports Bajaj Auto continues to be the countrys largest exporter of two and three -wheelers. During 2009-10, the Companys international sales achieved an all -time high of 891,002 vehicles which was 15% more than the sales recorded in the previous year. In 2009-10, exports accounted for Rs.32.46 billion (US$ 682 million), or 28% of the Companys total net sales. Table 3 gives the data. It is worth noting that three-wheeler exports now account for almost 50% of total threewheeler sales. Table 3: Product-wise Exports of Bajaj Auto (in numbers) Product Motorcycle Two - Wheelers Three - Wheelers Total 2008 - 09 6,31,383 6,33,463 1,39,056 7,72,519 2009 - 10 725023 726115 164887 891002 Growth 15% 15% 19% 15%

The export business enjoys a healthy geographical spread, as Chart C shows. The increased presence in Africa was primarily due to growth in Nigeria, Uganda, Angola and Kenya. Bajaj Auto has initiated a major brand-building effort in Africa for the Boxer, which involves creating exclusive branded outlets for the customers in terms of sales and after-sales service .

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Chart C: Exports, Geographical Spread

Sales in South Asia (excluding India) grew by 4%. The slowdown in Sri Lanka for three of the four quarters was more than compensated by growth in Bangladesh. Due to the fallout of the financial crisis, South-East Asia had a negative growth of 14%. The Companys subsidiary in Indonesia, PT BAI, clocked sales of 11,954 units. Although the Companys sales to Latin America recovered in latter half of 2009-10, the year as a whole was worse than before. Adverse economic conditions led to the regions sales de-growing by 7%. However, given Bajaj Autos strong brand presence in these markets, it is expected that the Company will increase sales as the Latin American markets improve in 2010-11.

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Three-Wheelers In 2008-09, Bajaj Auto had witnessed a 12% drop in domestic sales. 2009-10 saw a reversal. Like motorcycles, the Companys domestic sales of three-wheelers also picked up. Thanks to this, as well as growing export demand (see Table 3 above), the overall decline of threewheeler sales that occurred in 2008-09 has become a thing of the past. 2009-10 saw a 24% growth in the number of Bajaj Auto three-wheelers sold - up from 274,529 units in 2008-09 to 340,937 in 2009-10. As always, the Company remains the leading threewheeler player from India with a market share of over 55%. Table 4 gives the data.

Table 4: Three-Wheeler Sales and Share of Bajaj Auto (in numbers)

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Operations
Plants During the first half of 2009-10, a number of improvement activities were initiated at the shop floor level across all plants of the Company. Thanks to these initiatives, Bajaj Auto could produce 32% higher volume of output without any significant investments. Table 5 gives the plant-wise capacities for the last two years. Table 5: Plant-wise capacities (in numbers)

Pantnagar Bajaj Autos production at its Pantnagar plant, Uttarakhand, has been on the rise. In 2009-10, it produced 577,947 vehicles, up by 82% compared to 2008-09. Average production at Pantnagar for January-March 2010 was 60,000 per month versus 30,000 per month a year earlier. The plant is now geared to produce 80,000 units per month in April-June 2010, and then ramp up to 120,000 vehicles per month by September-December 2010. Keeping this in mind, the supply chain activities are also getting geared up. To maximise tax benefits available at Uttarakhand, the Company has shifted products like Discover and Pulsar 135 to Pantnagar.

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Waluj Waluj celebrated its 25th birthday in 2009-10. It also started production of the Discover and successfully ramped up the output. Waluj is now the export hub of Bajaj Auto. Of the 891,002 units of two- and three-wheelers exported in 2009-10, about 80% was produced at Waluj. The plant is now ready to meet even higher exports - up to 1 million units of two-wheelers and three-wheelers. Waluj won an award: Plant Best In Class Manufacturing Leadership Award for Two- Wheelers by the Stars of Industry Group. Chakan Given its core competence in high-end products, Chakan produced various upgrade versions of Pulsar. It is now ready to deliver the new KTM bikes. Chakan was awarded the Super Platinum Award for Manufacturing Excellence by Economic Times-Frost & Sullivan. Table 6 gives the data on which products are manufactured in what plant.

Table 6: Activities Across the Various Plants

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Subsidiaries
Bajaj Auto International Holdings BV (BAIH BV) As mentioned earlier, a 100% Netherlands based subsidiary of Bajaj Auto (Bajaj Auto International Holdings BV) was formed to focus on international ventures, including possible acquisitions. In 2007-08, BAIH BV invested 98.36 million to acquire 24.45% equity stake in KTM Power Sports AG of Austria, Europes second largest sport motorcycle manufacturer. It is a Vienna Stock Exchange listed company. In the course of 2008-09, BAIH BV increased its ownership of KTM shares to 31.72% at a cost of 21.26 million. During 2009-10, BAIH BV invested further 250,290 to increase its stake to 31.92%. Reinforcing its commitment to KTM and signifying the strategic importance of KTM brand and products, Bajaj Auto, through BAIH BV, invested a further of 20.16 million in April 2010 and increased its ownership of KTMs shares to 35.67%. With this, the total investment in KTM stands at 140.03 million. The first product developed under the joint development programme between KTM and Bajaj Auto was showcased at the Milan Motorshow in November 2009, and was received well. The product will go on sale in 2010-11. PT Bajaj Indonesia (PT BAI) PT BAI was incorporated in 2006-07 as a subsidiary in Indonesia with an issued and subscribed capital of US$ 12.5 million (Rs.562 million). During 2009-10, Bajaj Auto added further capital by US$ 17 million, thus increasing its total stake to 98.9% in PT BAI. The subsidiary assembles and markets Pulsars in Indonesia. At present, PT BAI assembles semi-knocked down parts. In the second half of 2010-11, it is expected to assemble complete knocked down parts, which attract lower customs duties in Indonesia. April 2010 saw PT BAI introducing the Pulsar 135. PT BAI has not yet broken even, though losses have reduced.Loss for 2009-10 was Rs.159 million at the PBT level, versus a loss of Rs. 615 million last year.

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A summary of profit and loss statement. 2 Table 7 A bridged Profit and Loss Statement

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Operating Working Capital and ROCE In the difficult year of 2008-09, the Companys management consciously took a call to support its vendors by significantly reducing payment cycle. This, and the rise in debtors, showed up in an increase in operating working capital as at 31 March 2009. That has changed significantly for the better in 2009-10. The vendor payment cycle has been normalized, and debtors tightened. Operating working capital has now turned negative to (-) Rs.6.95 billion. Moreover, the Company has seen a significant increase in its return on operating capital. From 55% pre-tax return on operating capital employed in 200809, the ratio has risen to 253% for 2009-10. As Table 8 shows , this has been driven by two factors: First, a Rs.14.42 billion increase in Bajaj Autos opera ting profits after interest and depreciation, compared to the previous year. Second, a Rs.5.90 billion reduction in working capital vis-a-vis 2008-09.

Table 8: Return on Operating Capital

(Rs. In Millions)

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Consolidation of Accounts and Segment Reporting Bajaj Auto has consolidated the financial statements of subsidiaries in accordance with the relevant accounting standards issued by Institute of Chartered Accountants of India. The summary of the consolidated profit and loss account for 2009-10 and 2008-09 is given in Table 9 below.

Table 9: Segment Revenue and Segment Results (Rs. In Millions)

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Chapter 5
Observation and Findings
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Research and Development

Bajaj Auto has a huge, extensive and very well-equipped Research and Development wing geared to meet two critical organizational goals: development of exciting new products that anticipate and meet emerging customer needs in India and abroad, and development of eco-friendly automobile technologies. While the manpower strength of the R&D represents a cross-section of in-depth design and engineering expertise, the company has also been investing heavily in the latest, sophisticated technologies to scale down product development lifecycles and enhance testing capabilities. Bajaj Auto R&D also enjoys access to the specialized expertise of leading international design and automobile engineering companies working in specific areas. Based on their own brand of gloBajaj Automobile Limitedization, they have built their distribution network over 60 countries worldwide and multiplied the exports from 1% of total turnover in Fiscal 1989-90 to over 5% in Fiscal 1996-97. The countries where their products have a large market are USA, Argentina, Colombia, Peru, Bangladesh, Sri Lanka, Italy, Sweden, Germany, Iran and Egypt. Bajaj leads Colombia with 65% of the scooter market, in Uruguay with 30% of the motorcycle market and in Bangladesh with 95% of the three-wheeler market. Several new models are being developed specifically for gloBajaj Automobile Limited markets and with these the company will progressively endeavor to establish its presence in Europe to Analysts also commented that as the two-wheeler industry had grown steadily for eight years, stages in the product life cycle would apply to the field sooner, rather than later and the decline stage would invariably come some day. There was little differentiation between the brands being launched apart from styling as most companies had introduced their four-stroke vehicles. With the failure of the joint ventures, the expected introduction of cheaper Chinese brands, stringent emission norms and threat from major international players, the survival of indigenous brands looked uncertain. Constrained with the ruling price levels in the market place, limited infrastructure and lack of technological innovations when compared to their foreign counterparts, whether the Indian companies would succeed in generating the kind of volumes needed to sustain in the competitive motorcycle market , remains to be seen.

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2009-10 was an important year. Bajaj Autos R&D departments were involved with the creation of number of new products, which have helped the Company to acquire more significant market presence. In addition, it has done considerable work in process engineering.

Products a) Pulsar 220 F - The Pulsar 220 F was re-defined to be the best performing sports bike in India. It became the fastest Indian bike. Work was done to enhance its power while reducing its fuel consumption. The bike was also made more affordable. b) Pulsar 180 UG - The bike was loaded with new features and style along with higher performance. It has, in effect, expanded the greater than 150 cc segment. c) Pulsar 150 UG - Pulsar 150 the backbone of the Pulsar brand was upgraded with a more powerful engine and new features like clip on handle bars and tank flaps. These features have made the Pulsar 150 the best seller in its category. d) Pulsar 135 LS - The Pulsar 135 LS was built to create a light sports offering in the Pulsar family. It was designed to be true to the Pulsar character of aggression, technological predisposition and outstanding style. This bike is powered by a 4V DTS-i engine which is the first of its kind. The four valves allow the engine to breathe well, generating superb performance, while DTS-i gives it excellent fuel economy. e) Discover DTS-si - Discover DTS-si was the bike where R&D blended the advantages of the twin plug ignition and swirl motion of the incoming charge in a 100 cc category engine to create Indias most fuel efficient motorcycle. R&D worked upon all aspects of the engine and vehicle design to maximise the gains in fuel economy along with a crisp throttle response. The success of these products has put Bajaj Auto in a strong position. R&D is now working on next generation bikes to maintain this momentum.

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Processes R&D has been working on improving its operations in number of areas, such as: a) Manpower - Expanding the team size in areas of design, analysis and validation to keep up with the rapidly expanding aspirations of the Company. b) Facilities - Enhancing R&Ds design, computing and test facilities. A notable addition has been a world class NVH (Noise, Vibration and Harshness) laboratory, which has been commissioned. This will give Bajaj Auto the ability to make even more refined products. c) Technology - R&D has developed the 4V DTS-i technology for outstanding engine performance. Design optimization has enabled it to be used on the Pulsar 135 LS, which competes at a lower price point. The DTS-i is controlled by a new generation CDI (Capacitor Discharge Ignition), which takes continuous load and temperature inputs to compute the optimum timing of each spark plug. Total Productive Maintenance : Bajaj Auto started its Total Productive Maintenance initiative ten years ago with its manufacturing plants. In March 2007, it achieved a milestone of having all its manufacturing facilities awarded as TPM Excellence Category 1 winners by JIPM (Japan Institute of Plant Maintenance). Last year, TPM and quality initiatives at vendor plants gathered further momentum. Since inception of Bajaj Autos Vendor Quality and Vendor TPM awards, the tally of Quality and TPM award winners is as follows: 1. Quality award Bronze: 2009-10: 24 winners (cumulatively, 108) 2. Quality award Silver: 2009-10: 30 winners (cumulatively, 89) 3. Quality award Gold: 2009-10: 16 winners (cumulatively, 44) 4. Quality award Platinum: 2009-10: 3 winners (cumulatively, 3) 5. BAL TPM award: 2009-10: 11 winners (cumulatively, 29) In other words:

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 Over 50% of BALs vendors have achieved a status of supplying zero defect components to the Companys plants for six straight months at least once during last four years (Bronze). Almost 40% achieved zero defect supplies for 12 straight months (Silver). 25% have had zero defect supplies for 24 straight months (Gold).

Three vendors have supplied zero defect components for more than 36 straight months (Platinum). On 7 April 2010, Bajaj Auto adopted a wider and more encompassing concept of TPM. It is the acronym for The Prime Mover towards excellence to build and continuously improve its core competencies. With this in mind, Bajaj Auto created a Company-wide TPM Kick-off. This initiative, the first of its kind in India, will align all key businesses and activities of the Company. Bajaj Autos core competencies rest on its values of innovation, perfection and speed. TPM is expected to build and continuously improve its core competencies, as also its entire supply chain including its suppliers and dealers.

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Bajaj Autos branding strategy

What does management theory say? As suggested that analyzing the new branding strategy adopted by Rajiv Bajaj of Bajaj Auto would be a great learning experience and they will analyze it from two perspectives. First, I will discuss it from the point of view of what management theory says. Positioning refers to how the brand is perceived in the mind of the customer. In other words, what does the customer think of the brand. Perception of the brand can be created in the mind of the customer or the customer develops it on its own taking his experience with the brand into consideration. Positioning is what you do to the mind of the customer and not what you do to the product in the factory. In simple terms, a brand should mean one and only one thing to the customer. In other words, a brand can have just one positioning. The positioning that each brand occupies in the mind of the customer has to be one, preferably unique. So, what Rajiv Bajaj is trying to do is exactly right because today the Bajaj brand means too many things to too many people. Even in the Rahul Bajaj Group, it means too many things to too many people, that is, finance, insurance, auto rickshaw, high-end and low-end bikes. As such, Rajiv is correct when he says that the Bajaj brand has been diluted and stretched beyond what is logical. Brand extensions by and large do not work. It has financial and some marketing logic on its side but not the logic of the mind of the customer. Remember, it is the mind of the customers where all the marketing battles are lost and won and not in the retail stores. The financial logic behind adopting brand extension strategy (trade acceptance, consumer acceptance, lower advertising costs, corporate image) is so overwhelming that it is very difficult to counter it.

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How Bajaj Auto is powering ahead?

Rajiv Bajaj faced his moment of truth when he overheard a customer say, "Yes, the Bajaj scooter is the cheapest, but that's what is deserves to be." The experience kindled in him a fierce desire to modernize the family business, the courage to change the success formula that was Bajaj Auto, and the confidence to step away from his father's shadow. He has since then propelled Bajaj Auto on a fast track, fuelled with his new R&D strategies. In every manager's life, there comes a moment of truth. A handful emerge from the experience as leaders. Rajiv Bajaj faced his moment of truth when he overheard a customer say, "Yes, the Bajaj scooter is the cheapest, but that's what is deserves to be." The experience kindled in him a fierce desire to modernize the family business, the courage to change the success formula that was Bajaj Auto, and the confidence to step away from his father's shadow. But not without a baptism by fire that lasted over a decade. The lowest point perhaps was 2001 when Hero Honda made and sold more two-wheelers (all motorcycles) than the King of the Roads, Bajaj Auto. Second, the Bajaj Auto share price dropped like a rock to Rs200. Yet by January 2004, the situation changed dramatically. What did Rajiv Bajaj do right? The transformation story began with Bajaj's realization that Pune's two-wheeler giant would have to transition from scooters to motorcycles and from a 'mass manufacturer of low-cost products to a high-quality, highly productive maker of world-class products'. To achieve this ambition needed local R&D and a change in mindset. Money the company had. The first visible sign of the change in focus was the garage full of models the company launched to cater to the different market segments. Some met with partial success, a few bombed. Bajaj first tasted success with the launch of Boxer. Customers whipped out their wallets for 542,000 of them in FY01, and the motorcycle's sales rose 33% to 723,000 units in FY02. Aggressively priced to undercut Hero Honda by Rs8,000, Bajaj Auto initially made a loss of Rs1,200 on every Boxer it sold. But once customer acceptance was confirmed, better production practices dropped cost by Rs4,000, making the Boxer both a volume growth driver as well as a profit center.

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Bajaj's next coup was the Pulsar (launched November 2001), targeted at the premium segment. The project took huge money and 36 months to develop under severe internal opposition. McKinsey, the leading management consultancy, had reservations; while Rahul Bajaj worried that it would affect Bajaj Auto's relationship with Kawasaki, their long-standing Japanese partner. It was the first bike to be marketed under the Bajaj brand, the first to be entirely developed by the product engineering division. In the event, Pulsar proved to be a money spinner, and in tandem, the Bajaj Auto share prices climbed to Rs400. The Pulsar, a powerful sub250cc motorcycle, was part of a restructured marketing strategy. With the Indian two-wheeler sector focused on motorcycles, Bajaj proposes to make Bajaj Auto the only Indian company with offerings in each user segment. Starting with the entry level Boxer series, the Bajaj Caliber 115 (launched March 2003) served the executive segment, Pulsar the premium segment, with the Eliminator being India's only cruiser bike. Currently under development, under a shroud of deep secrecy, is a 125cc world class bike codenamed K-60. The K-60 marks a restructured product planning process. "When we started, we asked ourselves if Chetak was the largest selling two-wheeler for 35 years, and [Hero Honda's] Splendor for the next 10 years, what will it take to make the largest selling two-wheeler for the next 10 years?" Bajaj told BusinessWorld's Ranju Sarkar. Incremental improvements over existing models were not enough, the value proposition had to go well beyond that of either the highly successful TVS Victor (half a million units sold since launch) or the Splendor (which sells 70,000 a month) or even Bajaj Auto's own Caliber.

Management style To replace a legend is never easy, to replace a legend when the legacy needs a major overhaul is even more difficult. Rahul Bajaj had created an extraordinarily triumphant company, and it required enormous courage for Rajiv Bajaj to tinker with the business model and change the success formula. But given the changes in the environment: more competitors and fiercer competition, changing customer needs and tastes, new technology and more sophisticated management tools and techniques, transformation was a necessity, not a luxury.

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Bajaj began the process by recruiting new talent, and forming a new core team of about 30 people. Among them was Abraham Joseph, Bajaj Auto's R&D head, and RL Ravichandran, head hunted by Bajaj to give a fresh impetus to Bajaj Auto's marketing strategy. Earlier this year, Ravichandran quietly left his resignation letter on Bajaj's desk and went on leave. He met Bajaj two days before he was scheduled to leave Pune for a new job in the Middle East. The conversation convinced him to stay on. Bajaj didn't offer to match the substantial salary of the new job. Instead, he offered him a different job profile. He would be freed from the daily chores of sales management in order to focus on shaping a gloBajaj Automobile Limited strategy for Bajaj Auto. "I stayed because Rajiv convinced me he really needed me. I found great sincerity in the need," Ravichandran told the media. The young Bajaj clearly knows not only how to hire talent, but also the knack of retaining people. Bajaj inspires his employees, not by dangling a carrot or through fear, but through his authenticity. He has no airs. Until a few years ago - he had to stop because of a severe knee injury - his favorite pastime was playing footBajaj Automobile Limitedly with the Akurdi factory workers. The source of his credibility however lies in his transparent management style. Listen to how he engages his managers in the unpleasant task of cost cutting. "Cost has to be looked at in a different way," he explains. "The wrong way is to tell people that we are cutting costs. People want to come to work eager to work. But if in a meeting I say that today I want to talk about cost cutting, I am sure they will do their best, but they will not be motivated. I will be talking in isolation. This is especially true in an owner-managed company. Inevitably there will be a feeling among executives that the benefit of cost cutting will go into the owner's pocket. Managers and workers also see cost cutting as a way to rip off and to make them work harder. Outside the company, among vendors and customers, the moment you talk of cost cutting, people think that the product's quality has gone down. Here in Bajaj Auto, we feel that cost cutting is all about improving quality at lower cost. That's how profitability improves. That's how customers keep coming back."

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Key Earning Drivers

Below are the key factors, which strongly affect the auto industry Government policy impact on petrol prices: Petrol prices determine the running cost of two/three wheelers expressed in Rupees per kilometer. Petrol prices are the highest in India as GOI subsidizes kerosene and diesel. But with the recent change in GOI policy to reduce the subsidy, the prices of petrol will remain constant at the current prices. This will have a positive effect on purchases of two/three wheelers. Improvement in disposable income: With the increase in salary levels, due to entry of multinationals following liberalization process and fifth pay commission, the disposable income has improved exponentially over the years. This will have multiplier effect on demand for consumer durables including two-wheelers. Changes in prices of second-hand cars: The second hand car prices of small cars have come down sharply in the recent past. This will shift the demand from higher-end twowheelers to cars and affect the demand for two-wheelers negatively. A further drop in second-hand car prices will lead to pressure on the two-wheeler majors who plan to release higher-end scooters and motorcycles. Implementation of mass transport system: Many states have planned to implement mass transport systems in state capitals in the future. This will have negative impact on demand for two-wheelers in the long run. But taking into account the delays involved in implementation of such large infrastructure projects the demand to be affected only five to seven years down the line. Availability of credit for vehicle purchase: The availability and cost of finance affects the demand for two- and three-wheelers as the trend for increased credit purchases for consumer durables have increased over the years. Therefore, any change with respect to any of these two parameters as a result of change in RBI policy has to be closely watched to assess the demand for two- and three-wheelers. Internal Factors - Strengths & Weaknesses

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Marketing Strategies
Tows Matrix for Bajaj auto limited

The focus of BAJAJ AUTOMOBILE LIMITED off late has been on providing the best of the class models at competitive prices. Most of the Bajaj models come loaded with the latest features within the price band acceptable by the market. BAJAJ AUTOMOBILE LIMITED has been the pioneer in stretching competition into providing latest features in the price segment by updating the low price bikes with the latest features like diskbrakes, anti-skid technology and dual suspension, etc.

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Bajaj auto limited adopted different marketing strategies for different models, few of them are discussed below : Kawasaki 4S - First attempt by bajaj to make a mark in the motorcycle segment. The target customer was the father in the family but the target audience of the commercial was the son in the family. The time at which Kawasaki 4S was launched Hero Honda was the market leader in fuel-efficient bikes and Yamaha in the performance bikes. The commercial of Kawasaki 4S had the punch line "Kyun Hero" means "now what hero" which reflected the aggressiveness in the marketing front by the company. Boxer - It took the reins from where the Kawasaki 4S left. Target was the rural population and the price sensitive customer. Boxer marketed as a value for money bike with great mileage. Larger wheelbase, high ground clearance and high mileage were the selling factors and it was in direct competition to Hero Honda Dawn and Suzuki MX100. Caliber - The focus for the Caliber 115 was youth. And though Bajaj made the bike look bigger and feel more powerful than its predecessor (characteristics that will attract the average, 25-plus, executive segment bike buyer), its approach towards advertising is even more radically different this time around. Bajaj gave the mandate for the ad campaign to Lowe, picking them from the clique of three agencies that do promos for the company (the other two being Leo Burnett and O&M). Going by the initial market response, the campaign was clearly a hit in the 5-10 years age bracket. So, the teaser campaign and the emphasis on the Caliber 115 being a `Hoodibabaa' bike placed it as a trendy motorcycle for the college-goers and the 25 plus executives both at the same time. Pulsar - Pulsar was launched in direct competition to the Hero Honda's 'CBZ' model in 150 cc plus segment. The campaign bearded innovative punch line of "Definitely Male" positioning Pulsar to be a masculine-looking model with an appeal to the performance sensitive customers. The Pulsar went one step ahead of Hero Honda's 'CBZ' and launched a twin variant of Pulsar with the 180 cc model. The model was a great success and has already crossed 1 million mark in sales. Discover - The same DTSI technology of Pulsar extended to 125 cc Discover was a great success. With this, Bajaj could realize its success riding on the back of technological innovation rather than the joint venture way followed by competitors to gain market share.
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Bajaj Pulsar and Hero Honda Hunk : A Comparison

While Here Honda is worlds leading bike maker, Bajaj is leading Indian bike marketer. There certainly lies so much of a difference between the two. Honda has been there for long in the bike market and is known for service as well as reliability and Bajaj has been an innovator. Every now and then it comes with something new and innovative and no doubt Bajaj bikes have mass appeal as well. In the Indian roads 150cc segment motorbikes have gained popularity and is now established market leaders in world of biking because of its awesome performance with reasonable pricing and ease of handling. It was Bajaj who introduced Bajaj Pulsar 150cc DTSi (Digital Twin spark ignition) powered engine with tagline of definitely male. Wonderful marketing caption as analyzed by pundits it created uproar in 150 cc bike segment as a whole. However, Bajaj Pulsar 150cc faced competition from the Hondas Hunk model. There is some amount of confusion amongst bike buyers as to what they choose between the two. They cant go for a marketing tagline and invest about 60k plus rupees on a bike. So, here is a brief comparison of the two bikes in terms of look, performance, reliability, pricing & more.

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Looks Hero Honda Hunk model portrays a majestic look with its exquisite style and side skirt in the tanks. Available in four colors of black, blue, silver and red, Hunk has a thump and muscular look with its gold polished front forks and silver finished central section. Equipped with butterfly-like headlight, Hunk reflects a sporty look with everyone stopping by to give a glance as it graces the Indian roads.

However, its the look of the Bajaj Pulsar that has a unique appeal. The fuel tank is huge with muscle and the design of Pulsar has been tweaked in Japan to make it as one showstopper, and the telltale headlight and the razor edged tail-end of the bike give it a fresh new look. Pulsar also has so many gadgets and hi-fi electronic gadgets to impress. Maybe looks wise, Bajaj pulsar 150cc DTSi seems to better the Hero Honda Hunk 150cc, but again looks are very much subjective, aint it?

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Performance The 150cc engine of Hunk produces 14.2 Ps @8500 rpm and powers 12.98 Nm torque at 6500 rpm. It is here that the 150cc Bajaj Pulsar DTSi engine produces 14.09 Ps at 8500rpm and 12.76 torque at 6500 rpm. Thus the power delivery of Bajaj Pulsar is bit mild in comparison to other bikes in the 150 cc segment. Although the engine is smooth yet it makes noise and loses its smoothness when pushed hard. However, Honda Hunk model does not vibrate even at a speed of 80 kmph. The Bajaj Pulsar 150cc model has advantage of better throttle responsiveness with its feature of Digital Twin spark ignition. Similarly, The Honda Hunk model also responds with a slightest twist. In the Pulsar model clutch works perfectly but guess the gearbox needs some modifications. However, the Hunk model of Honda boasts of a 5-speed gearbox and the clutch is extremely smooth and the gears can be shifted with slightest effort. Pulsar 150cc is known to have notchy gear shifting and the clutch is not as smooth as it is in the Hunk.

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Fuel Efficiency Mileage wise Honda Hunk gives about 55-60 km/L for the economy riding and 65 km/L on a long drive and Pulsar 150cc DTSi gives around 45-50 km/L mileage on economy ride and about 55 on long drive (should it be driven smoothly).

Brakes What about the disc brakes of these two motorbikes? Pulsar is equipped with good disc brakes, but it needs to be applied carefully as the brakes of Bajaj Pulsar are extremely sensitive. With applying front brakes too quick in the Pulsar model, it has a tendency to topple over. However, the front wheel of Honda Hunk has a 240 mm disc brake and the rear wheel is equipped with 130 mm drum breaks and that by itself provides with enough stability in the Indian road conditions. Dashboard If you are a fan of digital display panels, I am afraid that the Hunk may disappoint you a little bit. While the Hunk has nicely designed 3 dial dashboard displaying all the necessary details, Pulsars digital console is seductive for many Pulsar fans. Quality & Handling Pulsar 150cc DTSi generates more noise, as it gets older; say a 2-year-old pulsar is noisier than a new Pulsar, but hardly there is any such difference in Hunk. However, if the rider is fond of speed drive, his Pulsar 150cc DTSi will get heated up when driven at 60kmph speed for sometime. Yowza! Hero Honda Hunk stays cool no matter speed driving for a considerable length of time. It also means a difference with maintenance. Pulsar 150cc DTSi warrants change in clutch plates more often than a Hero Honda Hunk. So speed handling, Hunk betters the Pulsar. Comfort The riding position of Pulsar gives a sporty kind of feeling in comparison to the Hunk model. Pulsar can boast of a plush ride quality with great shock absorbers. There are a few who complain of awkward seating position on a pulsar and that a Bajaj Pulsar 150cc doesnt make a pillion rider feel as comfortable, especially if its a female. The riding position of Honda Hunk is comparatively better with raised handlebars and neatly placed foot pegs. The innovative gas-charged rear suspension gives a nice feeling as
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well. Additionally, the cushioned seats of Hunk model are extremely comfortable for long distance ride. The front seat of the Hero Honda Hunk model is separated by a step from the back seat and makes the pillion feel, male or female, quite comfortable.

Technology The digital technology incorporated into this high-flying motorbike, Bajaj Pulsar that gives a great satisfaction of a rare and daring riding experience. The bike was developed to ride in any kind of terrain with its nitrogen assisted rear gas shockers; telescopic suspension, optimized and improved exhaust gas system. While again Hunk is also a new age technology driven bike with low fuel consumption. Digital console of Bajaj Pulsar could be no competition, as most new age bikes will have that feature. Again the Hunk is slightly heavier than the Bajaj pulsar 150cc as it weighs 145 kg. Hero Honda Hunk lacks the LED Tail lamps, digital meter and has slightly hard gearbox.

Pricing As regards price, Bajaj Pulsar 150 cc DTSi is priced competitively at Rs.59,190 (exshowroom Delhi) and coming to about Rs.68,000 on road. On the other Hero Honda Hunk is priced at Rs.55,000 (ex-showroom) with auto start as optional and costing about Rs.65,000 on road. Verdict But all said and done, in the 150cc segment on the marketing front Pulsar 150 DTSi kicked off Hero Honda Hunk, but in core biking (by which I mean quality, handling and reliability) Hunk kicked the butt of Pulsar and there is no debate to this. Still better I would say, ask an owner who owns a Hunk for 2 years or so, he is still a happy man to have spent very little on maintenance and the Pulsar 150cc DTSi owner would have changed clutch plates, shock absorbers and is already looking for an upgrade of Pulsar (if he is a diehard Pulsar fan) or some other better model. The spares of Bajaj maybe cheaper than Honda but even Auto Car India acknowledged that Bajaj as a whole suffers from quality problems.

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According to consumers.
a) b) c) d) e) f) g) h) Bajaj bikes are cheaper than Yamaha bikes . The quality of Yamaha bikes are better than bajaj bikes . Yamaha scores high on looks as compared to Bajaj . On the basis of performance Yamaha beats Bajaj . Maintenance cost of Bajaj bikes are less than Yamaha bikes . Service facilities given by Bajaj is better than Yamaha . Value for money is more from Bajaj than Yamaha . On loyalty aspects Yamaha wins over Bajaj.

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Chapter 6
Conclusion

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Conclusion
Bajaj Auto has been a turn around story and is poised to do well under the helm of Rajiv Bajaj who is quite ambitious and aggressive in his approach and has steered the company well. From a position where all the two wheelers of the company made a loss around five years ago today Bajaj has got an operating profit margin of around 15% which is one of the highest in the automobile industry. The company enjoys a market share of about 30 % and this enables them to have cash reserves to the tune of Rs. 5000 crores. All of this was made possible because of several reasons. One was the change in mindset of the workers. The new plant set up at Chakan has got around 800 employees whose average age is 24. This was a deliberate step to let go of the baggage that the older generation at Bajaj had. Another step, which was taken, was vendor development and rationalization. This means that the company substantially reduced the number of vendors it had. This is a modern management practice and the essence of it is that the vendors should be partners in the process. This way the cost comes down because of reduced cycle times and lead times and better management of inventory of the parts that go into a product. More and more parts are also outsourced which enables the company to focus only on the core areas of operation. Since Bajaj accounts for a large part of the revenues of many of these vendors their service levels also improve, as they have to depend on the company for their survival. However the downside is that there is a lot of dependence on these vendors and in case they face a bad time it could mean that the business suffers significantly as compared to the before scenario. With a focus on research and development the company has been able to come up with new products that are hot sellers like the Pulsar. This focus has also enabled them to bring down the warranty costs, which currently stands at Rs. 18 per vehicle. In a scenario where the volumes are quickly growing to the extent of 41% in fiscal 2004, the reduced cost of warranty is quite significant. Otherwise the profitability of the company
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would suffer and more importantly if the warranty has to be used by consumers the brand would suffer. And referral sales will come down, which would mean that the company would have to spend more on marketing. So although on books they are only saving the amount, which was previously spent on service minus what they are spending now, in reality the effects will be much more. The road ahead is one, which is paved by ambitious plans of taking the company outside India, and explore the markets of China, ASEAN and Latin America. The worldwide twowheeler market is estimated to be 50 million vehicles and out of this 90% is accounted for from these regions itself. Bajaj plans to enter these markets through partnering with global players. Partnering a deal with Kawasaki for instance to gain access to the distribution network that it enjoys in the Asean region and partnering with Taiwanese companies to gain access to the Chinese markets. What is very interesting is that in these partnering deals Bajaj would take the products developed by them in house and use the physical infrastructure of the partnered companies in terms of plants and dealerships etc. This shows how confident the company is of its R & D capabilities, which has played a major role in bringing the company back to the current position. What is also in the pipeline is to bring in variants of the current offerings like Pulsar and CT 100. The benefits of bringing about variants are one it stimulates sales and two it segments the market. So that now customers who liked the CT 100 but preferred some other bike because of some feature missing will also go for it. Bajaj also plans to introduce the next generation of scooters, which promise to be more stylish and technologically advanced than what they currently have to offer. The big opportunity however does remain the international market. If the company can do well in this front the growth will be tremendous and unprecedented. The stock currently hovers around Rs. 1120, which translates into a P/E of 16 times its past year earnings. Considering the growth that the company has shown in the previous fiscal, the strong turnaround based on solid and sustainable long term steps and the ambitious plans of the company the stock is attractive and one could consider buying the counter. Through this article we have tried to identify various factors that would impact growth of a company in two wheeler industry. We reflected on the importance of innovation and consumer demand. To graduate from being followers to market leaders, companies need to invest in the right technologies and develop the right products at the right time. Bajaj has shown the willingness to change and thus has been able to achieve strong
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sales growth. To further consolidate its position and gain market share in the industry, Bajaj needs to do strategic rethinking and assess its product focus. The new strategy should also be backed by efficient on the ground customer support and continuous research for product innovation. The project is related to assess the Market perception and potential and how to increase the sales of Bajaj auto product and service . So to analyze the marketing research some important finding has been obtained about the Indian consumers. Most of them are aware about the Bajaj auto company. So it is necessary that Bajaj auto extend their dealers and marketing network by providing some special scheme. Some important findings are that most of the customers have shown defensive nature for any Survey. But after research it has found that current economic situation and busy lifestyle, people are in the heavy need of bikes. Indian customers purchase bike by keeping family purpose aspect in their mind. So they buy family oriented bikes .So Bajaj auto should manufacture bike at low price range and add new attribute, which make it distinct company among their competitors.

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Chapter 7
Recommendations and Suggestions

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Recommendations
Focus on High Margin Products: Around 50% of the two-wheeler consumers buy high quality products (products of executive and premium segment motorcycles). Margins on these products are higher. BAJAJ AUTOMOBILE LIMITED should adopt a deliberate strategy of focusing on executive and premium segment motorcycles and three-wheelers, and is reducing its dependence on lower-end of motorcycles and scooters segment. High margin products - Pulsar, Discover, Three-wheelers, Avenger. Low margin products - Platina, Scooters, Mopeds.

Now with increasing competition in the economy segment and limited scope from cost saving measures, it is believed this strategy of focusing on higher margin products would enable the company in retaining its operating margins. Below are other useful recommendations: Company should keep focusing on the fast growing motorcycle segment. In view of the new threat posed by Honda Motors in the scooter segment, the company needs to review its products line-up and launch new products to cater the changed demand. The company needs to take a look at its ungeared scooters offerings and need to adapt to the latest trends. The company needs to tap the export market more efficiently as there is a huge potential to make India as the world's two-wheelers production base. For this, it needs to look for joint ventures abroad. It needs to target the young age group more effectively as this group is extremely trend savvy. The advertising should have a fresh look and the product should live up to the Gen-X's expectations
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Suggestions
Effective ways to improve Bajaj auto sales

a) Bajaj auto company should understand and identify the basic requirement of target customers . What are the causes due to which our target customer changes there wants and preference about our products ? For example , customer complain about bajaj auto bike silencer , battery performance , and engine failure within a very short period . These are the facts by which many future customers of bikes move to other two wheeler bikes company. Therefore, bajaj auto company should conduct regular market servey to know about future customer demand and requirements. b) Bajaj auto company should change their image from an old and traditional automobile manufacture company to a new and high tech modern automobile manufacturer company , because most of the people say that bajaj auto is an old and scooter model manufacturer company instead of motorcycle manufacture company . This can be dont through expanding advertisement agencies , conducting seminar in school and college , which attract young generation . This can also be done through organizing some social and cultural program in different states . Bajaj auto company should start BAJAJ AUTO COMPANY FAIR at different cities time ti time .

c) Many customers do not purchase Bajaj auto bikes due to its low resale value compared to Hero Honda company bikes. Today customer want to purchase and invest money in that product which can give them better result on its sale. That is why many customers prefer Hero Honda bikes only for its optimum resale value . So Bajaj auto company should increase its market share by spreading awareness among people about exchange with new bikes scheme of BA. So many Bajaj scooter customer can avail this opportunity with there new bike.

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d) There should be an appeal forum where appellant can complain about their grievances regarding their motorcycles performance and dealer service . Customer feels that they can not have any proper means by which they can register their complain and get quick solution to their problem .Only well educated customer have knowledge about internet means by which they can lodge their complain easily but most of the customers are unaware and never practice this information medium. This type of customers bad mouth to others about Bajaj auto product and effects our image. so BAJAJ AUTOMOBILES should improve their communication network for the sake of suffering customers. This thing will also help to know about what deficiency present in our product and what are the proper remedies of these problems.

e) Bajaj should manufacture bike by keeping height factor in their mind. Because during market survey customers were demanding a bike which suit their height and weight. Specially physically disable person will prefer those bikes which are light in weight and suits their height with self start feature. So BAJAJ AUTOMOBILES should modify and produce bike according to different height and weight customer. f) Many customer whether they have Hero honda , Bajaj auto , Yamaha TVS , or any other bikes all were demanding for stepney for emergency period. So BAJAJ AUTOMOBILES will provide this extra benefit to their customer .This step will help BAJAJ AUTOMOBILES to increase its sales.

g) BAJAJ AUTOMOBILES should modify their seats according to preference and requirement of the customer. During survey customer were demanding to change its seats . According to them the seats should be divided into two parts with automatic or self adjusted dividers which will help the ladies to sit comfortable with their own balance or support instead of the rider.

h) Bajaj Auto Company should design their Bikes according to Rural Area purpose. Because customers who belong to rural area buys Enfield, Rajdoot and Hero Honda due to strong shocker, Brake shoe, Tight Tyre grip, horn, headlight for night vision,
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lack chance of failure and better ignition point. So Bajaj auto should design their future bike by paying attention toward this attribute. By which Bajaj auto can improve their sale in rural areas.

i) People who are doing their self business demand vehicle, Which can Fulfill their huge marketing purpose? They are demanding more Luggage facility in their bikes which can handle and support their goods with care. That is why this types of customers buy scooter not bikes. It will be better if Bajaj auto provide more luggage facility to their customers by modify design of the bike. j) During market survey customers say that there battery, silencer, average, coupling rubber problem in Bajaj auto. This type of problem occurs after a few years when Customer purchases their bike. So many customers denounce Bajaj auto bike and they do not ready to buy Bajaj auto bikes in future. So Bajaj auto must implement new Technology to remove this type of problems. k) Bajaj auto can become the bike of young generation and can give stiff competition to their competitor. If Bajaj auto modify and use high technology and engineering skill in their Bikes. This can only be possible. If Bajaj auto will add new attribute in their bikes like digital watch of time and date, automatic fuel check ,brake shoe, accident coverage, heavy beam light, shock absorber, pollutant free, air filter system. If these attributes Bajaj auto add in their bikes .They can definitely attract young generation. During my market survey, I have acquired these ideas from different customers whether they have Hero Honda, Bajaj Auto, TVS, Yamaha, and Other bikes. l) Rural area customers can become the future customers of Bajaj auto. Because they always want to purchase cheap and economical bike. Bajaj auto have all thing. Rural areas people demand bike which required low maintenance cost, strong body with strong soccer, suspension, less fuel consumption. But they dont have any knowledge about Bajaj auto new model bikes like Discover, Platina. So Bajaj auto should expand their marketing channel and Spread awareness among rural area people. m) On the basis of market survey customers were demanding that they will buy those company bike whose spare part available easily and service center everywhere. So
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Bajaj auto should open their service center everywhere and provide low cost spare parts easily. n) Bajaj auto should design and manufacture low price range bikes which can be suitable for low income group.

Bibliography

a) b) c) d) e) f) g) h) i) j)

www.Bajajauto.com www.Icmrindia.com www.docstoc.com www.scribd.com www.papercamp.com www.writebook.com www.indiacarsbikes.in www.24dunia.com www.Coolavenues.com Bajaj automobiles annual report

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