Financial Daily from THE HINDU group of publications
Tuesday, May 17, 2005
Marketing - Strategy
Bajaj Auto goes in for FMCG biz model to become top player
Mr Rajiv Bajaj
Pune , May 16
BAJAJ Auto's new Managing Director, Mr Rajiv Bajaj, is taking a leaf out of the FMCG business model to take his company to the No 1 slot.
Mr Bajaj has kicked off a project to completely restructure the company's retail network and create multiple sales channels.
Over the next few months, the company will set up separate sales channels for every segment of its business and consumers. Bajaj Auto's entire product portfolio, from the entry level to the premium, is being sold by the same dealers. The restructuring will involve separate dealer networks catering to the urban and rural markets as well as its three-wheeler and premium bikes segments.
"Bajaj Auto also plans to set up an independent network of dealers for the rural areas," Mr Bajaj told Business Line.
Plans are now being firmed up to rationalise its 500-strong dealership network, in some cases closing down un-viable city dealerships or asking them to move to the rural areas.
The company has identified 20 cities outside which rural dealerships will come up, including Chakan near Pune, Niphad near Nashik, and the outlying areas of Surat and Kanpur to begin with.
"The needs of financing, selling, distribution and even after-sales service are completely different in the rural areas and do not makes sense for city dealers to control this," Mr Bajaj said.
"The city dealer is happy with the proposal since he can focus on selling motorcycles which is witnessing huge growth," Mr Bajaj said, adding that the number of city dealers will come down slightly.
"But, then, they get better volumes since discounting disappears when competition is reduced."
The company also plans to set up exclusive dealerships for its three-wheeler products instead of having them sold through an estimated 300 of its existing dealers.
"The three-wheeler business is very different from our other products with even the buyer profile varying from that of a two-wheeler," Mr Bajaj said.
Bajaj Auto plans to appoint 100-150 dealers exclusively for its three-wheelers so that they can focus on the job, get in volumes and make the business viable.
Meanwhile, the company's high-end bikes will soon be sold only through premium showrooms that the company plans to set up in 50 locations across the country to provide its top spenders with a superior buying experience.
"If FMCG companies are benefiting from such a distribution model, why can't we do it too," says Mr Bajaj, who, however, says that the big change will take some time.
"It is a complex process and it will take two years to restructure the entire network," he added.
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