Many a time I have wondered why business leaders say any particular thing in the interviews. Why do they reveal much of their business strategies? Haven’t we read the MNCs talking about their ‘India plans’ in the newsprint, or Mahindras announcing their strategy for commercial vehicles? Is it that they really think revealing their strategies would help them in some ways?
After a while I put on a little skepticism – may be they want to fool their competitors by misguiding them about their strategies; may be they just want to give a push to the falling share-prices; may be they want moral boost up for their partners or see it as an advertising strategy; or may be simply the Big Boss needs a little ego-high some times. A lot can happen – business is a bad world after all.
In 2007, Bajaj had decided to exit 100 cc segment of motorbikes. [Link]. At that time their CT 100 had done well and then Bajaj Platina was not doing bad either. But they had reasons for taking this decision. The profit margin in 100 cc segment is very low and their main competitor Hero Honda takes almost the whole cake (55% of segment in 2006). So Bajaj decided to remain only in the higher capacity segments – 125 cc and above - where their margins were higher and they had good brands like Discover and Pulsar.
But now, Bajaj has done a flip-flop and has announced to reenter the 100 cc segment [Link]. The company is launching 100 cc Discover (with DTS-Si engine) by the end of this month and it will counter 100 cc Splendor and Passion from Hero Honda.
So what happened to much hyped Bajaj strategy to focus on premium and higher end bikes only and exit the entry level 100 cc segment? Is it because the recession has eaten into the buying powers of customers who now prefer lower cost bikes? Or was the company really not able to read the markets and went on a wrong strategy which it has corrected now?
I agree with Rajiv Bajaj that the company has not ‘changed’ its strategy really. May be it kept the ‘original’ strategy hidden and sent a wrong note of comfort to Hero Honda by telling that it would exist the 100 cc segment and hence Hero Honda should take it ease and become complacent. In the meanwhile they kept working on the higher-end Discover platform to come up with its variant of a 100 cc bike! Seems like a really good strategy!
I think it is also about brands. Bajaj’s Discover and Pulsar have been fairly successful bikes and have good brand names. A CT-100 from Bajaj had become to be seen as a bike for rural areas, while customers in even the semi-urban areas preferred the Hero Honda bikes for their trusted brand names and reliability. When Discover established and became to be seen as a reliable brand, it was in the interest of and convenient for Bajaj to extend the Discover brand even in 100 cc segment. I don’t think this move will erode the Discover brand.
This 100 cc Discover with DTS-Si engine will have a mileage of 80 kmph and is being promoted as ‘long distance bike’. This bike will be in the ‘premium entry-level’ segment and would fill the gap between entry-level 100 cc Platina and 135 cc Discover. The positioning and targeting of the bike seems to be alright.
Overall, I congratulate Bajaj for this tactical move. I don’t see this case of prior decision of exit and then the reentry as a strategic flip-flop. But some challenges would remain to see through that the strategy delivers results. Rest all is in the hands of customers.
(Rahul)
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