'Give us one more year, and we'll be back'

From a position of unassailable leader in the country's two-wheeler market, the Rs 3,584 crore Bajaj Auto has been edged out to the No 2 slot by the north India-headquartered Hero Honda. At the Pune headquarters of Bajaj,
R L Ravichandran, the 51-year-old vice-president of business development and marketing, thinks he knows why. When the company first began to lose marketshare, it failed to accept the fundamental shift in market preferences from scooters to motorcycles till it had almost lost the game. But Ravichandran is plotting a comeback. He is using a flurry of new launches to get back on top. Excitement is being built around new-generation motorcycles like Eliminator and Pulsar which Bajaj unveiled in 2001.

A veteran of many marketing battles, the grey-haired Ravichandran has, in his three-decades-long sales and marketing career, sold everything from weighing machines and sewing machines to, of course, two-wheelers with the erstwhile TVS-Suzuki. After four years with Bajaj Auto, he is gearing up for the battle of his lifetime. In an exclusive interview with Prasad Sangameshwaran on behalf of Indian Management, Ravichandran speaks about the reaction of a company still coming to terms with lost glory, and how it is planning to reach for the heights once again. Excerpts:

From a commanding No. 1 position, Bajaj has slipped to No. 2. What are the reasons for this and what are the lessons learnt by the company?

The inability to see a shift in the market, and the inability to predict consumer preferences are the two major reasons for (Bajaj Auto) losing the No. 1 status. However, the top slot is determined by two things. One, for a particular year who sold more vehicles. In that way we have lost the No 1 status. But there are two kinds of organisations.

Some accept that they have lost and ask what can be done about it. Then there are those who say that, yes we lost it (the No. 1 position), but we will gain it back. The ability of an organisation which understands that it has lost a position of eminence but it can come up with a phenomenal response to this change is what I find interesting in our company.

When the composition of the market is changing "" as the market is moving from scooters to bikes "" the ability of the company to quickly adapt, absorb and come back is damn good resilience. This is what was possible by our company.

Today we have not only changed the product-mix, but are also in a position to regain the company's financial strength, which is very critical. How a major change in product-mix causes a major change in profit mix is, in my opinion, the grand story that people should possibly understand from Bajaj.

Were there any other reasons apart from failing to understand the shift in market preference that led to the loss of the numero uno spot?

Our (earlier) strengths were in terms of capacities and one or two single-product lines. If you look at all the products that Bajaj was making and selling, they are non-competing ones. For instance, there is no competition for our step-thrus (M80s) even today. There is no competition for our three-wheeler auto-rickshaws and for our scooters.

Earlier, these three products gave us 100 per cent of our turnover. We did sell motorcycles, but our marketshare was only seven-eight per cent. And the competition was intense in the motorcycle segment. The moment the industry shifted to bikes, the familiar territory of exclusivity to Bajaj was lost. So we had to fight the mindshare of Yamaha, Honda and Suzuki.

This was the difficult game, because the company was always able to work on its manufacturing plant and production capacities but probably did not understand the minds of consumers. (Our problem was) how to get consumers to look at Bajaj when they were evolving. For example, if the world is shifting from pagers to cellular phones, if you say that we will make only pagers you will not be in the limelight at all. So you have to immediately move into cellphone services to create extraordinary consumer excitement. That change was very critical for us.

What prevented Bajaj from making that change earlier on by getting more aggressive in the bike segment?

May be because we had a lot of money with us. We are still a very cash-rich company. Every year we add at least Rs 300 crore to our reserves. So we probably felt that we could fight the market and bring the consumer back to our products. For instance, a well-to-do individual never feels the need to get up and run. Only if he feels that he is losing his health, money, bank balance and status will he feel that he should get up and run.

If he is already too lazy then he cannot stand up and run. Thankfully, realisation came to us, though it was a bit late. But when the realisation came and struck, the ability of the organisation to respond too was quick, so we could come back. Within one year, we are back on track.

So when did realisation actually dawn on Bajaj Auto?

Actually the realisation came in 2000. It was that late. Till 2000, there was a lot of hope that we could win back the scooter segment with volumes. But when we reached a stage of less than 30,000 scooters, that is the time when we felt that we are finished.

According to many observers, the fact that Bajaj's top-selling scooter, Chetak, had waiting lists running into lakhs led the company to misread the market and believe that scooters were here to stay.

I cannot answer this question completely as I'm only four years old in this organisation. But going by whatever I have heard from others, like I said earlier, the company had a phenomenal capacity to produce a particular model. So we're all hoping that we could resurrect the market. But when we could make one million scooters, we could sell only 0.4 million. The excess capacity of 0.6 million in the last one year is what we are now converting to the rest of the products. And the new plants are churning out far more interesting products which consumers want.

Further, if the products we made were a total failure, then possibly our reaction could have come faster. But even in scooters, we sell 35,000 units a month. With our step-thrus last year, we sold 10,000 units. We still sell 14,000 auto-rickshaws. So the speed with which you have to align yourself will always be delayed if you are running a decent innings.

So what was the trigger?

What hit us is that we were no longer going to be the No. 1 two-wheeler manufacturer. That was the major point actually.

What is your gameplan to become No. 1 again? What initiatives are you taking for this?

By selling a product that is growing. That has happened only recently. Primarily 70 per cent of the market buys motorcycles today. In this, we currently have a market share of 25 per cent. The day we hold a marketshare of 35 per cent in this segment, we will be on top again. I would like to achieve this mark by the end of this year. But if competition does not allow it, we will have to wait for more years.

We can succeed by our own efforts or sometimes we will succeed by somebody else's failures. So far it was our failure. When we started realising that, we have become aggressive. When you become aggressive you can make others fail. If both the things work in tandem we will come back to the top slot once again. After all we are still talking in units. We are not talking about profits and turnover. There is no issue for us in those areas.

Did Bajaj stretch a winning formula of its scooters till the bubble burst like many other Indian companies?

It is circumstantial. Till March 31, 2001, Bajaj Auto was No 1 in unit sales. In 2001-02 we are No. 2. But in 2002-03 let the performance speak for itself. But we have rebounded beautifully. We have grown by 65 per cent in motorcycles when the industry is growing at 30 per cent.

How do you explain the earlier complacency?

Primarily, complacency occurs when you have no challenge. When people are waiting to buy your products you do not become very fast. Complacency occurs when you can eat four times a day, while others cannot even eat once. For example, if the country or the political scenario or the economy supports long-term players who are enriched by wealth, property, image or brand, you will feel that you cannot eradicate him overnight.

There are still many players in the country with less than a five per cent marketshare. They are happy content and eating three meals a day. There is nothing happening to them. It is a question of fire in the belly. So if you don't have that fire then you cannot be successful.

Can I say that Bajaj was risk-averse? Hero Honda introduced the first four-stroke 100 cc in the mid-eighties and got instant success, but Bajaj did not respond for more than a decade?

That is not risk aversion. That is luck. See, when Honda came into the country, Bajaj did not need it (a tieup with Honda) as the country was selling so many scooters. But (Brij Mohan) Munjal wanted it because they were making cycles and not two-wheelers. So they joined hands with Honda. Then Suzuki went to TVS, Yamaha went to Escorts.

The last player was Kawasaki and Bajaj took it. If Bajaj was risk-averse they should not have taken Kawasaki, which does not make any bike below 200 cc. So I don't think it is risk-aversion as much as the extent to which you can predict the future. There was only a delay in terms of anticipating and understanding (the market).

Was it also a case of stretching the product focus too thin when you should have focused on your existing products like scooters and bikes in the mid-late 1980s? Instead, Bajaj launched low-powered scooterettes like the Sunny in the 1990s.

Bikes were made at least 15 years back by Bajaj. Unfortunately, the bikes we made were not up to consumer expectations. So consumers always gave fourth place to our bikes. Maybe, it was due to character, styling, or maybe the others were better. And having taken on a partner like Kawasaki, we did not want to keep going to others and dropping partners. We wanted to work with them and perfect the art with their knowledge and our cooperation. We have done that now. So, in this circumstantial scenario, we could not have become a leader in bikes long back.

Why did it take Bajaj 12-13 years to get a product like the Caliber after the KB (Bajaj's first bike) was launched?

Till 1996-97, there was no need to focus on anything else. The major change happened from 1998-99 onwards. The shift took place in 2000-01. The changes taking place in any one year can be difficult for anyone to predict, including Hero Honda. Even they didn't predict that they would become so successful with the Splendor.

The narrowing price band between scooters and motorcycles and the fuel-efficiency that a bike could offer over a scooter were primarily responsible for such a major market shift. Even if we had predicted this, the extent of the shift would not have been easy to predict. It would not have made any difference as long as people bought 100,000 vehicles from Bajaj every month. The difference was that we had to change within a very short span of time.

So, there is nothing about losing the No 1 position. There's nothing wrong about it. In every sport there is no individual who will remain No 1 for a century. In our case, for 36 years we have remained No. 1. Only for one year have we become No. 2 not No. 4. We are also challenging. Give us one more year and we'll comeback to No. 1.

If you had to relive the past decade, how would things have been different?

Probably, I could have controlled 50 per cent of the Indian two-wheeler market. This is because I would have worked with that much more vengeance on the bike segment also. In the process, I could have created two entities and become the leader in both, which is traditional and future products. Thus we could have ruled the present and the future. I would have taken a product profile which would have given me a double-edged sword.

In segments like price, product and family, we would have ruled with the scooter, scooterettes and step-thrus - which we are still ruling today. But we could also have ruled over product segments where power, strength, mileage and fuel-efficiency play a major part. I could have walked with both the horses saddled.

Many say that real competition for two wheelers is just surfacing with Honda setting up a full-fledged subsidiary in the country and with Yamaha also coming into its own. How does the long-term game look for players like Bajaj?

The country is very diverse. Western India adopted motorcycles first, followed by south India. People in east and north still buy geared scooters. So people who come here with one successful product from Thailand, Malaysia or Japan, cannot bring a product tomorrow into India, claiming to be the latest one. They'll probably be rejected outright.

So for someone to be successful in the second largest two-wheeler market in the world, the most important thing is to understand the Indian psyche. Anybody with an Indian knowledge and understanding and the R&D to translate the needs of Indian consumers to product delivery has got far more chances to succeed.

At Bajaj, we have knowledge and R&D, but we may need far more technical skills. So if we are not aligned to anybody it'll only be more helpful to us. For instance we can buy a clutch from someone, a speedometer from another international manufacturer, and headlamp and gears from a third player. We can use our design or hire a design house to make our own product, and still call it the most respected brand in the country. So we'll give each market segment what it wants.

So far our thinking was that we can make consumers change their needs. We tried to fit a round object into a square. We need to understand and respect customers to succeed. Anybody who has that understanding and access to the right technology should succeed. The organisation has got resilience that is why we have huge cash reserves and are debt-free.

(This article was published in the April 2002 issue of Indian Management)