Page 192 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Strategic Management

Notes Progress to 2005
By 2005, Bajaj Auto was well established as a major motorcycle manufacturer in India. It
had created a major manufacturing facility at its base in Pune. It had developed a strong
distribution and service network and an important R&D facility, which had led to the
introduction of new Digital Twin Spark Ignition Technology. The company had also
become a major exporter of motorcycles in the Asian region and was negotiating to set up
a manufacturing facility in Indonesia. Although not mentioned in the case above, the
company had an important line of vehicles – Bajaj was the leading company in the Indian
three-wheeler market and had a profitable revenue stream from this market segment.

However, Bajaj Auto had lost its market leadership in motor cycles to a rival company,
Hero Honda. This was partly as a result of having little success in launching successful
models into the fast-growing executive segment of the Indian motor cycle market, where
Hero Honda was the market leader. Bajaj was still engaged in a fierce price war with Hero
Honda in the standard market segment where low production costs were crucial to
profitability. In addition, the original Japanese motorcycle company, Honda, had entered
the Indian market in 2004 as a new threat to both Hero Honda and Bajaj.
Finally, Bajaj was so pleased with the overall performance of Mr Rajiv Bajaj that it appointed
him as managing director of the group in 2005. He had delivered a major transformation
in the group’s fortunes over the period from 1998 and was well positioned to take the
group forward.

Questions
1. What are the main problems facing Bajaj Auto? To what extent are they related to
operations issues?

2. Is it possible or even realistic to employ US-style operations strategies in a country
where the suppliers present rather different problems from those experienced in the
US?
3. Can you think of any other options to assist Bajaj develop its strategy beyond
supply chain issues?

4. What lessons can companies draw from the experience of Bajaj on the application of
the strategic issues?

10.3 Barriers and Issues in Strategy Implementation

Management must keep in mind the following key issues that arise in implementing strategy
and how empowering systems might relate to such issues.
1. Time Horizon: Such systems have both long-term and short-term dimensions. For example,
rewards like productivity bonus should be based on quantitative measures of performance
related to the short-term. On the other hand, it is appropriate to link long-term rewards
with qualitative measures and a few relevant quantitative measures.
2. Risk Considerations: When risk-prone behaviour is desired, qualitative measures of
performance may be more beneficial, for example, rewards like bonus or stock options.
This is because quantitative measures may lead to risk-averse behaviour to avoid failure
rather than risk prone behaviour to achieve results.

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