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Strategy is nothing but specialisation: Rajiv Bajaj, MD & CEO, Bajaj Auto
On the evolution of the Indian motorcycle industry over the past decade or so:
What is the one word each manufacturer owns that is in the mind of the motorcycle consumer? In my view, the word that Honda owns is quality, Hero owns is mileage and the one word Bajaj owns is power, thanks to the Pulsar. If it's Yamaha, that word is style. The one word that TVS owns is cheap (not in a bad sense) but as in the least expensive.
If this is true, then it points to a very high state of evolution in the market place where consumers are able to clearly associate brands with positions. Each of the above-mentioned brands has a clear position.
This has its pros and cons. The pro is that, for instance, if a consumer wants power, other things being equal, he will come to you. So, the brand becomes safer in that sense. It is relatively insulated. The con of that is people who don't seek power won't be really too interested in you-but I think the advantage is greater than the disadvantage.
On Bajaj's position:
We got back into the game with the Pulsar. People buy the Discover because it reminds them of the Pulsar. It's like a younger brother of the Pulsar; or a 'domesticated' Pulsar. There is this clear divide in this market place. Hero has a 71% share in the 100cc segment; I find that, after having a satisfying experience with Hero, consumers move up and they come to us. So, people who want bigger and stronger bikes come to us, but they will not buy a 100cc from us.
On whether Hero MotoCorp will continue to be number one because most consumers want fuel efficiency:
Yes, it will, if mileage continues to remain so important- unless someone is able to make a technology breakthrough and take it away from them. For example, Hero bikes give 65kmpl efficiency. Being engineers, we are always thinking of how to make something better. We don't know the difference between better and different. The consumer does not think better, he thinks different.
What I mean is that if Hero is delivering 65kmpl, we would be happy if we made something delivering 70kmpl. However, consumers can't tell the difference as 65 is only an average. The first time the consumer can actually perceive a difference is if there is a minimum 20% difference. A 33% difference is even more noticeable, while a 50% difference cannot be missed.
That's why we made the Pulsar 150cc. It's not a coincidence that 150cc is 50% more than 100cc. The question now is can anybody produce a technology that is 50% better? My view is that to move from 65kmpl to 78kmpl (a 20% difference) is difficult; from 65kmpl to 70kmpl has happened, but that is evolution, not a revolution.
On how Bajaj can create that difference:
We are now less in the engineering and more in the marketing industry. We have to be perceived to be different, with credibility; and there are also not too many tech levers to do this. For this, you might have to create a perception that you are at loggerheads with your father and will refuse to ever make scooters-thereby creating a perception that I am wedded to the Pulsar. I believe that one day everybody will buy powerful bikes; it may take five years or 15 years, but you have to direct the whole organisation in that direction. Strategy is nothing but specialisation. So, we have to stay where we are and try to expand the appeal for what we stand for, which is power.
On the future for the Pulsar, which is now a decade-old:
We follow a platform strategy. One platform is 125-200cc, from which we make the Pulsars and the KTM bikes. The next platform is 250-350cc, and there will be both brands out of this also. If the Pulsar has to go any further, we need another larger platform, but that would not be right as the Pulsar is not a niche bike like a Harley or a Ducati. So, 350cc may be a good place to stop as of now. Ten years down the line, the Pulsar can go much further.
On the need for more brands besides the Pulsar, Discover and KTM:
Many industries have a three-tier structure. People at the bottom buy on price, those at the top for exclusivity, and those in the middle for value for money. The most successful car brands of the last 50 years are Toyota and Volkswagen. They have understood how to position their brands and play the market. For VW, it is Skoda at the bottom, Audi at the top and VW in the middle. Toyota does it even better with Daihatsu at the bottom, Lexus at the top and Toyota in the middle.
It may seem simplistic, but we have a similar strategy. At the bottom, we have the Boxer, a workhorse brand primarily for Africa, and the Platina, for slightly more evolved markets. In the mid-tier, we have Pulsar and Discover. The fun bike is Pulsar, while the fun bike that you can also ride to work is the Discover. At the top tier, we have KTM, of which we will be buying some more shares to up our stake from 40% currently (to close to 49%). However, we do not want to be the majority stakeholder in KTM; to convey a perception of exclusivity and premium-ness, it is better that Bajaj not be a majority stakeholder.
On the brand equity of KTM:
KTM has existed for 60-70 years. Last year, it sold 81,000 bikes, of which 11,000 were sourced from our Chakan factory. For some time they have been Europe's second-largest bike maker, after BMW. Harley, BMW, KTM, Triumph and Ducati comprise the top five in the West. Harley is the cruiser, the sexy red Italian hot rod is Ducati, the SUV of bikes is KTM, BMW is the tourer (between a racing bike and a cruiser)...so each brand owns a position.
We are trying to strengthen KTM's position as an off-road champion while gently introducing it as relevant as an on-roader too-like a Pajero. We considered Ducati, BMW and Triumph (as partners) at various points of time. KTM made a lot of sense as all the others existed in the 800cc-plus segment. KTM actually starts from 25cc as kids can legally ride in Europe from the age of six...this was most important as far as synergy is concerned with Bajaj.
The front-end thrives on differentiation, and the back-end on synergies and economies of scale. This is why KTM sells in 32 dealerships that sell only KTMs; and we have 600 that sell only Bajaj. I would not be surprised if KTM hit 200,000 numbers in the near future as it is now entering Malaysia and other emerging markets. The 125-400cc range is where there could be great synergy with Bajaj. By 2015 we expect to produce 50% of KTM bikes. In fact, out of the 120,000-odd to be sold by KTM this year, about 30% should be out of Chakan.
On downplaying the Bajaj brand:
People always look at this subject in the current context. Every organisation starts by targeting one group of customers with one product. We too had one scooter for the family man who could not afford a car. As they become successful, companies try to do two things: either they try to make more types of products or they go into more markets.
This is where the complexity starts. Should I make many products for one market, make one product for all markets or make all products for all markets? I think what works is staying in one space and trying to dominate the world. That's how you specialise. For example, Bajaj used to make scooters that used to be 70% of the market at that point time-not 100% as there were mopeds too. However, Bajaj had a massive market share. Now, the question is: was the market share a result of doing one thing really well or because there was something magical about the brand Bajaj? I believe it was the former.
Family brands have two choices: either not to use it or use it in only one product category so that it stands for something. Can you imagine BMW hair oil? But there is a Bajaj hair oil!.
Source:
Strategy is nothing but specialisation: Rajiv Bajaj, MD & CEO, Bajaj Auto - The Economic Times
On the evolution of the Indian motorcycle industry over the past decade or so:
What is the one word each manufacturer owns that is in the mind of the motorcycle consumer? In my view, the word that Honda owns is quality, Hero owns is mileage and the one word Bajaj owns is power, thanks to the Pulsar. If it's Yamaha, that word is style. The one word that TVS owns is cheap (not in a bad sense) but as in the least expensive.
If this is true, then it points to a very high state of evolution in the market place where consumers are able to clearly associate brands with positions. Each of the above-mentioned brands has a clear position.
This has its pros and cons. The pro is that, for instance, if a consumer wants power, other things being equal, he will come to you. So, the brand becomes safer in that sense. It is relatively insulated. The con of that is people who don't seek power won't be really too interested in you-but I think the advantage is greater than the disadvantage.
On Bajaj's position:
We got back into the game with the Pulsar. People buy the Discover because it reminds them of the Pulsar. It's like a younger brother of the Pulsar; or a 'domesticated' Pulsar. There is this clear divide in this market place. Hero has a 71% share in the 100cc segment; I find that, after having a satisfying experience with Hero, consumers move up and they come to us. So, people who want bigger and stronger bikes come to us, but they will not buy a 100cc from us.
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On whether Hero MotoCorp will continue to be number one because most consumers want fuel efficiency:
Yes, it will, if mileage continues to remain so important- unless someone is able to make a technology breakthrough and take it away from them. For example, Hero bikes give 65kmpl efficiency. Being engineers, we are always thinking of how to make something better. We don't know the difference between better and different. The consumer does not think better, he thinks different.
What I mean is that if Hero is delivering 65kmpl, we would be happy if we made something delivering 70kmpl. However, consumers can't tell the difference as 65 is only an average. The first time the consumer can actually perceive a difference is if there is a minimum 20% difference. A 33% difference is even more noticeable, while a 50% difference cannot be missed.
That's why we made the Pulsar 150cc. It's not a coincidence that 150cc is 50% more than 100cc. The question now is can anybody produce a technology that is 50% better? My view is that to move from 65kmpl to 78kmpl (a 20% difference) is difficult; from 65kmpl to 70kmpl has happened, but that is evolution, not a revolution.
On how Bajaj can create that difference:
We are now less in the engineering and more in the marketing industry. We have to be perceived to be different, with credibility; and there are also not too many tech levers to do this. For this, you might have to create a perception that you are at loggerheads with your father and will refuse to ever make scooters-thereby creating a perception that I am wedded to the Pulsar. I believe that one day everybody will buy powerful bikes; it may take five years or 15 years, but you have to direct the whole organisation in that direction. Strategy is nothing but specialisation. So, we have to stay where we are and try to expand the appeal for what we stand for, which is power.
On the future for the Pulsar, which is now a decade-old:
We follow a platform strategy. One platform is 125-200cc, from which we make the Pulsars and the KTM bikes. The next platform is 250-350cc, and there will be both brands out of this also. If the Pulsar has to go any further, we need another larger platform, but that would not be right as the Pulsar is not a niche bike like a Harley or a Ducati. So, 350cc may be a good place to stop as of now. Ten years down the line, the Pulsar can go much further.
On the need for more brands besides the Pulsar, Discover and KTM:
Many industries have a three-tier structure. People at the bottom buy on price, those at the top for exclusivity, and those in the middle for value for money. The most successful car brands of the last 50 years are Toyota and Volkswagen. They have understood how to position their brands and play the market. For VW, it is Skoda at the bottom, Audi at the top and VW in the middle. Toyota does it even better with Daihatsu at the bottom, Lexus at the top and Toyota in the middle.
It may seem simplistic, but we have a similar strategy. At the bottom, we have the Boxer, a workhorse brand primarily for Africa, and the Platina, for slightly more evolved markets. In the mid-tier, we have Pulsar and Discover. The fun bike is Pulsar, while the fun bike that you can also ride to work is the Discover. At the top tier, we have KTM, of which we will be buying some more shares to up our stake from 40% currently (to close to 49%). However, we do not want to be the majority stakeholder in KTM; to convey a perception of exclusivity and premium-ness, it is better that Bajaj not be a majority stakeholder.
On the brand equity of KTM:
KTM has existed for 60-70 years. Last year, it sold 81,000 bikes, of which 11,000 were sourced from our Chakan factory. For some time they have been Europe's second-largest bike maker, after BMW. Harley, BMW, KTM, Triumph and Ducati comprise the top five in the West. Harley is the cruiser, the sexy red Italian hot rod is Ducati, the SUV of bikes is KTM, BMW is the tourer (between a racing bike and a cruiser)...so each brand owns a position.
We are trying to strengthen KTM's position as an off-road champion while gently introducing it as relevant as an on-roader too-like a Pajero. We considered Ducati, BMW and Triumph (as partners) at various points of time. KTM made a lot of sense as all the others existed in the 800cc-plus segment. KTM actually starts from 25cc as kids can legally ride in Europe from the age of six...this was most important as far as synergy is concerned with Bajaj.
The front-end thrives on differentiation, and the back-end on synergies and economies of scale. This is why KTM sells in 32 dealerships that sell only KTMs; and we have 600 that sell only Bajaj. I would not be surprised if KTM hit 200,000 numbers in the near future as it is now entering Malaysia and other emerging markets. The 125-400cc range is where there could be great synergy with Bajaj. By 2015 we expect to produce 50% of KTM bikes. In fact, out of the 120,000-odd to be sold by KTM this year, about 30% should be out of Chakan.
On downplaying the Bajaj brand:
People always look at this subject in the current context. Every organisation starts by targeting one group of customers with one product. We too had one scooter for the family man who could not afford a car. As they become successful, companies try to do two things: either they try to make more types of products or they go into more markets.
This is where the complexity starts. Should I make many products for one market, make one product for all markets or make all products for all markets? I think what works is staying in one space and trying to dominate the world. That's how you specialise. For example, Bajaj used to make scooters that used to be 70% of the market at that point time-not 100% as there were mopeds too. However, Bajaj had a massive market share. Now, the question is: was the market share a result of doing one thing really well or because there was something magical about the brand Bajaj? I believe it was the former.
Family brands have two choices: either not to use it or use it in only one product category so that it stands for something. Can you imagine BMW hair oil? But there is a Bajaj hair oil!.
Source:
Strategy is nothing but specialisation: Rajiv Bajaj, MD & CEO, Bajaj Auto - The Economic Times
He is the driving force behind that investment that led to birth of Pulsar.
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