India Two-Wheeler Segment market analysis

Chapter 1 Introduction 1.1) Historical Background Motorcycle history begins in the second half of the 19th century. These are descended from the "safety bicycle," a bicycle with front and rear wheels of the same size and a pedal crank mechanism to drive the rear wheel. The history of the motorcycles in India dates back to the year 1955, when the Government of India required strong, rough, and tough motorcycles for the Indian Army and the police force in the western part of the country which had a rough and craggy terrain. The motorcycles in India cater to a variety of needs of the consumers. The motorcycle has become one of the most popular modes of transportation, and is preferred by the daily commuters. The segment of motorcycles in India went through a tremendous change in the 90s and the two wheeler market, especially the motorcycle market was filled with options.

1.2) Scope of StudyOur study is limited as we have conducted the survey in Delhi regions and analysed the market scenario in terms of Segmentation and Target market of Bajaj Motorcycles, SWOT analysis, Porters’ five force analysis and Marketing Mix for the same. We have also done a competitor analysis of Bajaj motorcycles with other brands in two-wheeler segment.

1.3) Method of Data CollectionThe data has been collected with the help of Surveys carried out with the working professionals and students. Feedbacks were collected by us with the help of a questionnaire & it contained various questions regarding two wheeler motorcycle segments. Feedback on the basis of their experience helped us in carrying out market research for Bajaj motorcycles and competitor analysis. Lal Bahadur Shastri Institute of Management, New Delhi

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Chapter 2 Indian Two Wheeler Industry 2.1) Indian Automobile IndustryThe Automotive industry in India is one of the largest in the world and one of the fastest growing globally. India manufactures over 20 million vehicles (including 2 wheelers, 3 wheelers and 4 wheelers) and exports more than 2.9 million in the year 2011-2012. At present, the dominant products of the automobile industry are Two Wheelers with a market share of over 77%, passenger cars with a market share of about 15%, Commercial vehicles with a market share of over 5%, and three wheelers share about 3% of the market between them.

2.2) Categorization of Two Wheeler SegmentThe two-wheeler industry consists of three segments viz., scooters, motorcycles, and mopeds. The major players in the 2-wheeler industry are Bajaj Auto Ltd (Bajaj Auto), Hero Moto Corp, TVS Motor Company Ltd (TVS) and Honda Motorcycle and Scooter India, Private Limited (HMSI) accounting for over 93% of the sale in the domestic two wheeler market.

2.3) Market share in Motorcycle SegmentBased on market research, around 70% of the motorcycles sold in India in 201112 belonged to the 75-125cc (engine capacity) segment, bikes which are positioned for the mass commuter segment where better fuel economy and low price are the prime customer considerations. However, the volume share of this segment has been coming down over the years with the share gradually being taken away by bikes in the 125cc and 150cc segments.

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2.4) About the CompanyBajaj Auto is a major Indian vehicle manufacturer headed by Rajiv Bajaj. It is based in Pune, Maharashtra, with plants in Chakan (Pune), Waluj (near Aurangabad) and Pantnagar (Uttaranchal). The oldest plant at Akurdi (Pune) now houses the R&D centre ahead. Bajaj Auto makes and exports automobiles scooters, motorcycles and the auto rickshaw. Bajaj Auto came into existence on 29 November 1945 as M/s Bachraj Trading Corporation Private Limited. It started off by selling imported two- and threewheelers in India. In 1959, it obtained license from the Government of India to manufacture two- and three-wheelers and it went public in 1960. In 1970, it rolled out its 100,000th vehicle. In 1977, it managed to produce and sell 100,000 vehicles in a single financial year. In 1985, it started producing at Waluj near Aurangabad. In 1986, it managed to produce and sell 500,000 vehicles in a single financial year. In 1995, it rolled out its ten millionth vehicle and produced and sold one million vehicles in a year.

Product Portfolio In FY2012, Bajaj Auto sold over 3.83 million motorcycles in India and abroad. In doing so, it grew sales by 13.2% over FY2011, which was lower than in the previous two years. However, as mentioned earlier, sales growth was muted for the industry as a whole, which grew by 13.7% versus over 24% in the last couple of years. Thus, despite lower growth, Bajaj Auto held on to a share of over 32%.          

Bajaj Pulsar 150 DTSi. Bajaj Discover. Bajaj Avenger. Bajaj Platina. Bajaj Kawasaki KB 100 RTZ. Bajaj Boxer. Bajaj Caliber. Bajaj Pulsar 220 DTS-Fi. Bajaj Krystal. Bajaj Pulsar 180 DTSi.

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Chapter 3 Segmentation ,Targeting and Positioning Market segmentation divides a market into well defined slices which consists of a group of customers who share similar needs and wants. In our survey, we have taken the responses and segmented the motorcycle market according to demographic and Psychographic factors. Geographical factors are not taken into account since our study is conducted in Delhi region. Before moving towards market segmentation, we will try to find out the perception of people (on a scale of 1 to 5, where importance increases from 1 to 5) for various factors affecting their buying decision for motorcycles.

Factors Affecting Consumer Buying Behaviour 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0

Factors Affecting Consumer Buying Behaviour Fig 1 Lal Bahadur Shastri Institute of Management, New Delhi

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Thus it is clear from the graph that, style and design is the most important factor in buying a motorcycle. Comfort level is the least important factor. From our analysis of the responses, we have drawn a comparison between satisfaction levels of Bajaj bike owners and others on various parameters of the bike they own on a scale of 1 to 5, where level of satisfaction increases as one moves from 1 to 5.

5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0

Bajaj

Competitors Fig 2

Thus it is clear from the above graph that, Bajaj motorcycle owners are highly satisfied in comparison to its competitors on o Performance o Style and Design o Insurance facility. Bajaj motorcycle owners are dissatisfied in comparison to its competitors on o Mileage However on any other parameter, Bajaj is almost comparable to its competitors. Lal Bahadur Shastri Institute of Management, New Delhi

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3.1) SEGMENTATION:According to Demographic factors:1) Age

Total No of Respondents(80)

29% 18-24 year 25-30 year

71%

Fig 3 A sample of 80 respondents was collected, out of which 29% were of 18-24 years of age.71% were of age 25-30 years of age.

Respondents in Age group of 18-24 years 25 20

19

21

15 8

10 5

4

3

No of Respondents

0

Fig 4 Lal Bahadur Shastri Institute of Management, New Delhi

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It is clear from the figure that Hero is the leading motorcycle brand in 18-24 years of age group. However Bajaj is giving tough competition to Hero with second leading position.

10 8 6 4 2 0

9

Respondents in the Age group 25-30 years

9

4 1 Bajaj

Hero

Royal Enfield

No of Respondents

Yamaha

Fig 5 For age group 25-30 years, Bajaj and Hero stand equally in terms of market share. 2) Marital Status –

No of Respondents(80)

18%

Single Married

82%

Fig 6

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Marital Status: Single

Respondents using Bajaj Motorcycle(23)

30%

Discover Pulsar

70%

As per our responses, unmarried consumers which are using Bajaj motorcycles, a large part of this market segment i.e.70% are using Pulsar and 30% are using Discover.

Fig 7

Respondents using other motorcycles(43)

9% 2%

3% Hero Yamaha

21%

TVS

65%

Honda Royal Enfield

As per our responses, unmarried consumers which are using other motorcycles, a large part of this market segment i.e.65% are using Hero bikes and Yamaha constitutes 21% of market share.

Fig 8

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Marital Status: Married

Respondents using Bajaj (5)

40% 60%

Discover

As per our responses, married consumers which are using Bajaj motorcycles, a large part of this market segment i.e.60% are using Pulsar and Discover constitutes 40% of market share.

Pulsar

Fig 9

Respondents using other brands(9)

44%

As per our responses, married consumers which are using other motorcycles, a large part of this market segment i.e.56% are using Royal Enfield and Hero constitutes 44% of market share.

Hero

56%

Royal Enfield

Fig 10

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3) Family Annual Income-

25

22

20

17

15

10

10 5

7

5

9 8

Bajaj Others

2

0 less than 2 lacs

2- 5 lacs

5- 8 lacs

more than 8 lacs

Fig 11  < 2 lacs: Consumers prefer to have other motorcycles.  2-5 lacs: 10 consumers own Bajaj while 19 out of 22 other users have Hero.  5-8 lacs: 7 consumers own Bajaj while 6 own Hero and 6 own Yamaha out of 17 other users.  > 8 lacs: 9 consumers use Bajaj bikes Thus, it’s clear that the present market segment of Bajaj motorcycles comprises of consumers which have annual family income more than 5 lacs.

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4) Profession-

No of respondents(80)

9%

47%

Business

44%

Service Student

Fig 12 Profession: Business Class

Business class consumers (7)

29% Bajaj Pulsar

71%

Royal Enfield

Business class customers whom we surveyed, 71% owned Royal Enfield and 29% constitutes Bajaj Pulsar

Fig 13 Profession: Service Class Service class respondents using Bajaj (13)

46%

54%

Discover Pulsar

In service class sector, Pulsar constitutes 56% while 46% own Discover

Fig 14 Lal Bahadur Shastri Institute of Management, New Delhi

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Service class customers using other bikes (22)

9% 5% Hero Honda

86%

In service class consumers, a large part of consumers (86%) own Hero

Yamaha

Fig 15 Profession: Student Student using Bajaj(13)

23% 77% Discover

Pulsar

As is clear, Students using Bajaj motorcycles prefer Pulsar as compared to Discover

Fig 16 Student using other bikes(25)

32%

Hero

52%

Honda Royal Enfield TVS

4%

Yamaha

As is clear, Students using other motorcycles prefer Hero and Yamaha as compared to Honda, Royal Enfield and TVS.

4% 8% Fig 17 Lal Bahadur Shastri Institute of Management, New Delhi

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3.2) TARGETING: On the basis of segmentation of market, Bajaj target:  Consumers with age group 18-30 years.  Consumers with family income more than 5 lacs.  Consumers which are students and business class people. Out of this segment market, Bajaj should focus on a target group which best suits their interests for Bajaj motorcycles. Since Bajaj motorcycles have high price, it should target consumers with high annual income specially business class consumers with age group of 18-30 years.

3.3) POSITIONING:  Bajaj has positioned Pulsar in the “High Style High Price” segment along with Hero Honda Karizma, Hero Honda CBZ, Royal Enfield Bullet.  It also has positioned CT 100 in the “Low Style Low Price” segment along with Hero Honda Splendor, TVS Star City.

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Chapter 4 SWOT Analysis 1. Strengths        

Focus on Extensive Research & Development High performance products across all categories High export to domestic sales ratio(1:2) Legacy of brand name Highly experienced management Great finance support network Product design and development capabilities Widespread distribution network

2. Weaknesses  Has presence mostly in higher segment (150cc,180cc)  Less variety of products in lower segment(100cc,125cc)  Still not a very established name in the global market  Hasn’t employed the excess cash for long

3. Opportunities    

Growing two-wheeler market in India and across globe Growing gearless trendy scooters market More maturity in moving towards higher end segment(Above 200cc) Can use the existing R&D capabilities for new models in lower segment

4. Threats    

Tough competition from domestic as well as foreign players Tough competition from Hero which has large market share (~ 56%) Margin squeezes from all the directions(Price as well as cost) The competition catches up with any new innovation in no time

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Chapter 5 BCG Matrix Analysis MARKET SHARE G R O W T H

H i g h Pulsar 150 and 180cc Discover

XCD 125 Pulsar 200 and 220cc Blade

Platina CT 100

Avenger Kristal

R A T E L o w

High

Low Fig 18

1) Star (high growth, high market share)Stars use large amounts of cash: As the Discover, Pulsar 150 and 180 cc are the star performer of Bajaj so Bajaj has to invest on advertisement to capture maximum market share. Stars are leaders in the business: Today Bajaj Pulsar 180 and 150 cc are leaders in market. As they are first choice of the youth those are interested in looks, technology and performance. Stars usually generate cash for the company. Pulsar generates maximum cash for Bajaj auto ltd. Pulsar is having 47% of market share in its segment. It is critical that Stars should hold the market share, because the future rewards are generally cash cows.

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2) Cash Cows (low growth, high market share)Profits and cash generation should be high: Platina and CT 100 are the models which generates high profits for Bajaj auto ltd. Low market growth does not attract new competitors: Now, the market share growth of Platina and CT 100 are very less, they are unable to attract new customer in the market. Low market growth, call for less investments: It is of no use to invest more on these models of Bajaj motorcycles. It is better to invest on R&D, or some other star performer. Cash Cows are often the stars of yesterday and they are the foundation of a company.

3) Dogs (low growth, low market share)Avoid and minimize the number of Dogs: Avengers and Kristal now becomes the dog for Bajaj auto ltd. They have to stop the production for these models and rather use this investment in designing of some new model. Watch out for expensive 'rescue plans': Bajaj should stop further investing in these models and save the investment for some other purpose. Low growth coupled with low market share is generally a loss making proposition for a company. Dogs must deliver cash, otherwise they must be liquidated.

4) Question Marks (high growth, low market share) Question Marks have high cash demands (High Market Growth): Pulsar 200 and 220 cc are in high demand but their market share is low. The customer which come the segmentation for these models are less in number, so it difficult to say whether is wise to invest further in these models. Question Marks generate low returns, (Low Market Share):The market share of XCD 125, Pulsar 200, 220 cc, Blade have very less market share. The customer which come the segmentation for these models are less in number, so it difficult to say whether is wise to invest further in these models. If the market share remains unchanged, Question Marks will simply absorb great amounts of cash. Either invests heavily, or sells off, or invests nothing and generates any cash that you can. Lal Bahadur Shastri Institute of Management, New Delhi

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Outcomes of such a strategy: Cash Cows Business Units will reach their profit target easily. They are often allowed to reinvest substantial cash amounts in their mature business. Dogs Business Units are fighting an impossible battle and, even worse, now and then investments are made. Question Marks and Stars receive only mediocre investment funds; hence they can never become Cash Cows (or Stars).

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Chapter 6 PORTER’S FIVE FORCES Porters’ model of competitive forces assumes that there are five competitive forces that identify the competitive power in a business situation or these help us to find the attractiveness of a market segment. These five competitive forces identified by the Michael Porter are:

Fig 19 1. Threat of substitute products   

There are many substitute products available like Yamaha R15 and Fazer, Hero Splendor and Passion Pro. Customer can easily find the product that you’re offering at the same or less price. Quality of the competitors’ product is better- Hero is still known for its mileage and technology. Substitute product is by a company earning high profits so it can reduce prices or can give discount offers to the lowest level. Hero as of now acts as the strongest competitor to Bajaj motorcycles.

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2. Threat of new entrants The market runs on high economies of scale and on high economies of scope as well.  Need for technical expertise is high and thus a new entrant will have a huge uphill task.  Owning a strong distribution network is very important and is very costly which certainly takes a lot of time and energy. There is also involvement of huge cost.  All these make the barrier high enough to be restraining for any new entrants in the market. 3. Industry Rivalry The industry rivalry is extremely high with any product being matched in a few months by competitors. This instinct of the industry is primarily driven by the technical capabilities acquired over years of development under the technical collaboration with international players.  Exit barriers are high and rivals stay and compete-a large market share to capture.  Fixed cost is high resulting huge production and reduction in prices. 4. Bargaining power of suppliers Suppliers are concentrated and well organized.  Many substitutes available to suppliers.  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 a critical need. 5. Bargaining power of Buyers Product is not differentiated much.  Buyer’s cost of switching to a competitors’ product is low as almost all companies are producing at relatively same price.  Buyers are price sensitive and fully informed.

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Chapter 7 Marketing Mix McCarthy classified various marketing activities into marketing-mix tools of four broad kinds, which he called the four Ps of marketing, i.e. Product, Price, Place, and Promotion.

Marketing Mix 4 P’s

Place

Product Product Variety, Quality, Design, Features, Brand Name, Packaging, Sizes, Services, Warranties, Returns

Promotion

Price Least Price, Discounts, Allowances, Payment Period, Credit Terms

Sales Promotion, Advertising, Sales Force, Public Relations, Direct Marketing

Channels Coverage, Locations, Inventory, Transport

Fig 20  PRODUCT MIX(width)There are various segments which Bajaj auto is trying to serve. It is trying to target lower level segment with Bajaj platina (100cc) & Bajaj discover (125cc, 135cc) which targets the middle level segment customers. Apart from this the premium segment is served by Bajaj pulsar (150cc, 180cc, 200cc, 220cc) and Bajaj avenger.

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 PRICE MIX ECONOMY SEGMENT (100ccsegment): This segment is served by Bajaj platina (100cc), Bajaj Discover (100cc), Bajaj ct100.The ex-showroom price in Delhi of platina is around Rs 40000.  PREMIUM SEGMENT (125cc-200cc): This segment is served by Bajaj Discover (125cc, 135cc), Bajaj pulsar (150cc, 180cc, 200cc). The price of Discover is around Rs 52500.  PROMOTION MIXo BAJAJ auto has got showrooms evenly spread all over india. It also sells its premium segment bikes through probiking showrooms owned by company. o Promotional strategies adopted: The largest maker of premium bikes in the country, which currently sells only one 100cc bike, is already working on a plan to launch another low-cost bike, the biggest motorcycle segment in the country o Re-launching with improve features and advertising the lower segment bikes such as platina and discover 100 will give further competition to Hero Splendor and other motorcycle in lower segment.  PLACE MIXo Bajaj has a wide network of showrooms and has its has reached to mass population in rural areas as well through its distribution network and tried to tap the rural market. o Through its innovative marketing strategy, it should target the rural areas and market the lower segment of motorcycles such as discover (100cc) and platina(100cc) which are also very much fuel efficient which is an important factor for rural population of our country. o The premium segment motorcycle such as Ninja and Pulsar (200cc and 220 cc) is to be more promoted in urban areas where people go more styling and less of fuel efficiency. Lal Bahadur Shastri Institute of Management, New Delhi

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CONCLUSION & RECOMMENDATIONS 1. From the analysis we can say that Pulsar and Discover are two products of Bajaj in motorcycle segment which contributes largely in its revenue. 2. Pulsar and Discover are two brands in motorcycle segment of Bajaj which are preferred most and they did not use the phrase 'Bajaj Auto' to market either. Highly differentiated target groups for Pulsar and Discover is the prime reason behind the divorce of these sub-brands from the parent brand, Bajaj Auto 3. Bajaj was correct in adopting the two brand strategy. This has increase market share of Bajaj Auto Ltd. Today the reason why consumers buy a Pulsar is because it is a Pulsar, not because it belongs to Bajaj. 4. Bajaj had designed Pulsar and Discover for two extreme ends of the consumer spectrum. The target group for Discover was 'the commuter' as it stands for balance, responsibility and all things homely. Conversely, Pulsar, 'the performer', symbolized arrogance, irreverence and attitude and hence categorized in the sports category and is mainly preferred by youngsters. 5. From the analysis we can say that Style and design and Price are the two most important factors influencing customer buying behavior. Pulsar and Discover both ranked high on Style but a notch higher on price compared to its’ competitors. Thus, Bajaj should try to reduce prices in this segment. 6. Respondents using Bajaj Motorcycles found to be less satisfied on Mileage as compared to its’ competitors. To capture large market segment and to survive in the competition Bajaj should work on increasing the mileage in this segment through better technology.

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LIST OF ILLUSTRATIONS

Fig 1 Factors affecting Consumer Buying Behavior Fig.2 Bar graph showing Satisfaction of Bajaj and its’ competitors on various parameters. Fig 3 Total number of Respondents on the basis of Age. Fig.4 Motorcycle owned by the Respondents in the Age group 18-24 Fig.5 Motorcycle owned by the Respondents in the Age group 25-30 Fig.6 Total number of Respondents on the basis of marital status . Fig.7 Unmarried customers using different variants of Bajaj. Fig.8 Unmarried customers using different variants of other motorcycles. Fig.9 Married customers using different variants of Bajaj. Fig.10 Married customers using different variants of other motorcycles. Fig 11 Comparisons of Bajaj and its’ competitors on the basis of Annual Family Income. Fig.12 Total number of Respondents on the basis of Profession Fig.13 Motorcycle owned by the Business class. Fig.14 Service class customers using different variants of Bajaj. Fig.15 Service class customers using different variants of other motorcycles. Fig.16 Students using different variants of Bajaj. Fig.17 Students using different variants of other brand motorcycles. Fig.18 BCG Matrix Fig.19 Porters’ five forces. Fig.20 Marketing Mix .

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LIST OF REFERENCES

1. http://business.mapsofindia.com/automobile/two-wheelersmanufacturers/motorcycles.html 2. http://www.moneycontrol.com/news_html_files/news_attachme nt/2012/Indian-2W-Industry_ICRA_280512.pdf 3. https://www.crisilresearch.com 4. http://www.siamindia.com/scripts/export-trend.aspx 5. http://www.siamindia.com/scripts/market-share.aspx 6. http://www.siamindia.com/scripts/production-trend.aspx 7. http://www.siamindia.com/scripts/domestic-sales-trend.aspx 8. http://www.bajajauto.com/en-in/

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BIBLIOGRAPHY

1. Introduction to Marketing Concepts; Graeme Drummond, John Ensor 2. Marketing Management :South Asian perspective 14 e Philip Kotler, Kevin Keller, Abraham Koshy & Mithileshwar Jha (Pearson) 3. Anderson, Sweeny, Williams (2007); Quantitative Methods for Managers 4. Pindyck S Robert, Rubinfeld L Daniel, Mehta L Prem,(2009), Managerial Economics

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