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Unformatted text preview: Bajaj GROUP Analysis of various strategies GROUP 7 LOGO Introduction to Bajaj Group Conglomerate founded by Late Sh. Jamnalal Bajaj in 1926. One of the oldest & largest conglomerates based in Mumbai. Group comprises 34 companies & its flagship company Bajaj Auto is ranked as the world's fourth largest two & three wheeler manufacturer. The Group is currently headed by Mr. Rahul Bajaj. Bajaj Automobile Bajaj Auto is a major Indian vehicle manufacturer based in Pune. Bajaj Auto makes and exports automobile scooters, motorcycles and auto rickshaws. Bajaj is India's second largest motorcycle maker. Is ranked as the world’s fourth largest two­ and three­ wheeler manufacturer. BAL has significant presence in all the three basic segments ­ Price Segment, Value Segment and Performance Segment SWOT Analysis Strategic Decision1 De­merger 17th May 2007 The Board of Directors of Bajaj Auto Ltd agreed to a demerger on 17th May 2007 BAL, the parent company, renamed as Bajaj Holdings and Investment Ltd ("BHIL") and the business was demerged into two new incorporated subsidiaries ­ Bajaj Auto Ltd ("BAL") and Bajaj Finserv Ltd ("BFL"). The auto and manufacturing businesses of the company would be held by BHIL Wind power project, investments in the insurance companies and consumer finance would go to BFL Structure prior to demerger Structure after demerger Why Management wanted to go for merger They can focus & strengthen on these core businesses and competencies The two new companies will be able to tap (on an arm’s length basis) into the cash pool of the investment company to support future growth initiatives, if required. The demerger will enable the investors to hold separate focused stocks. The demerger will facilitate more transparent benchmarking of the companies with its peers in their respective industries Some Findings Bajaj Auto Ltd: Bajaj Auto, Bajaj Finserv and Bajaj Holdings & Bajaj Investments on day 1 of relisting recorded a market cap of Rs 22,239 Crore as against Rs 21,042 Crore on March 13, 2008 which was the last day before the demerger, an increase of around 5.6 per cent. cent. The auto company started focusing on auto business (market share The in the motorcycle segment increased from 22.9% in 2001-02 to 33.5% in 2006-07) 33.5% The wind power and financial services company started focus on The wind-energy generation, insurance, consumer finance and new initiatives in financial services space (has set up a total of 138 windmills, Bajaj Allianz Life Insurance & General Insurance ranked second in among private insurers in India) ranked Market Reaction to Shares Results of Demerger Analysis Inferences The Auto division unlocked value for shareholders (its EVA alone was more than that of composite business) BFL and BHIL showed negative EVA, clearly indicating that there was no proper use of Capital. The sum of EVA of the three divisions after the demerger is seen to be greater than the composite business EVA, indicating a successful value unlocking for the shareholders Demerger unlocked significant shareholder value. The markets also reacted positively, with scrips appreciating when the news of the demerger broke out Strategic Decision2 Doing Away with Bajaj name Fearing Brand Dilution Why Management wanted to go for merger Rajiv Bajaj, MD, BAL recently decided to do away with Mother brand ‘Bajaj’ from all bikes, showrooms, service centers. Comes in the view of fear of brand dilution. Bajaj name for fans and Pulsar may sound quite odd. Actually there is a fear that higher end products may suffer because of low cost durables. They are planning to do something like P&G Analysis of Possible Reasons to Arrive At This Decision Analysis Branding is one of the key aspects for any business. One very obvious reason to do this is because there is Bajaj is no more unified post demerger and there is no strong and single driving force. The second reason is change in brand identity Consumer buying Discover may want economy, mileage, resale realization and easy maintenance — a family bike. On the contrary sporty, edgy, performance­driven lifestyle offering — Pulsar. Force fully putting both the segments under a unified brand may dilute the brands. Provide independence to each family of brands, and release various brands from fear of having brand dilution by having a common name­Bajaj Removing Bajaj will avoid confusion with other Bajaj businesses that share the name. Our View Point Our View Point Many reputed companies like TATA did not have any problem using same name from salt. On the contrary confusion should be for the smaller groups and not for giants. High cost of launching a new. Company’s Legacy built over the years will totally be lost Strategic Decision3 Doing Away with Bajaj name Fearing Brand Dilution Strategic Decision3 Planning for Ultra Low Cost Car Project In 2009 it announced to launch low cost car with French Car maker Renault and Japan’s Nissan Motor The aim was to give a direct competition to Tata Nano & to target completely new segment In July, 2011 Bajaj took the final decision and abandoned the project Strategic Decision3-Low cost car segment Why they abandoned the project? Lukewarm market response for Tata’s Nano Eating away their own customer segment of their high end bikes like Pulsur Rising price of fuel & volatile market(Interest rate) Strategic Decision4 Introduction Bajaj Pulsar Introduction Bajaj Pulsar Why Bajaj Pulsar Demand of their flagship product scooter rapidly coming down Bikes like Bajaj 4s, Boxer and Kawasaki were performing below average High end bike segment was very much unexplored SWOT­Analysis Strength Strong Brand identity Unique Design Technologically advance Opportunity Can enter foreign markets Can exploit the new & untouched segment Weakness May cannibalized their own low cost bikes Not fuel efficient Threat Tata’s Nano Rising fuel prices Strategic Decision5 Abandonment of Bajaj Scooters Abandonment of Bajaj Scooters Why to quit from Scooter’s business? Worldwide motorcycle market is growing faster than scooters Company was making huge profit in selling strong brand like Pulsar & Discover Scooter market is shrinking Strategic Decision6 Introduction of New Brand Identity and Logo Introduction of New Brand Identity and Logo In January, 2004 Bajaj Auto unveiled a new logo as part of the ongoing changes happening at Bajaj Why New Logo? New vibrant and colorful look that would go along with its line of products Plans to go global Increasingly lower age profile of its average customer Wants to get out from the image of only scooter producing company REFERENCES http://en.wikipedia.org/wiki/Bajaj_Auto http://www.karvy.com/articles/bajaj.htm http://www.mysensex.com/nifty/876new­look­boards­ demerged­bajaj­auto.html http://finance.yahoo.com/q/b? s=BAJAJAUT.BO+Financial+Blogs http://www.businessworld.in/index.php/ ...
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