SYMBIOSIS INSTITUTE OF MANAGEMENT STUDIES (Constituent of Symbiosis International University)
Business Environment MBA 2017-19
‘PESTLE analysis: Bajaj Auto Ltd.’ Submitted To,
Dr. Arjun Madan
Submitted By, Name
Roll Number
Pawankumar Dihiye
D-18
ACKNOWLEDGEMENT I would like to confer my heartiest thanks to my coordinator of Business Environment Dr. Arjun Madan for giving me the opportunity to expel and work in the field of Environmental Analysis, especially its practical applications. While preparing my project I got to have an in-depth knowledge of practical applications of the theoretical concepts and definitely the things which I have learned will undoubtedly help me in future, to analyze many processes going on in our economy. I would also like to thank all those people who directly or indirectly helped us in accomplishing this project
ABSTRACT ...................................................................................................................................................... 4 METHODOLOGY ............................................................................................................................................ 5 INDUSTRY AT A GLANCE ................................................................................................................................ 9 ABOUT BAJAJ AUTO LTD. ............................................................................................................................ 11 INTRODUCTION ........................................................................................................................................... 12 PESTLE ANALYSIS OF BAJAJ AUTO LTD. ....................................................................................................... 14 CONCLUSION ............................................................................................................................................... 18 REFERENCES ................................................................................................................................................ 19
There are many companies the world over, that conduct PESTLE analysis on their brands in order to ascertain strategies for the future or else to understand the market before launching them. It is a fundamental tool of market planning and strategizing that must be carried out to comprehend market trends and the systematic risks involved. PESTLE analysis gives you an overview of the whole situation your business might be in. Precisely, it i s a bird’s eye view of the stimulus and the scenarios that surround your trade and your business. PESTLE, is an acronym in which each letter denotes certain factors for the study. These factors affect the market in many ways and alter the way strategies are thought of and made. P stands for political factors, while E stands for economic ones. S has to do with social factors in a country whereas T sums up all the technological aspects of the market. L denotes legalities of the environment and E accounts for the environmental aspects and its influence upon the nature of the trade you are in. Almost every major and minor organization tries to conduct this analysis, but with regards PESTLE analysis example, I have taken Bajaj Auto Ltd. as the company for analysis. In this paper, we will be looking at all of the above-mentioned aspects and their effect on the Business Environment of Bajaj Auto Ltd.
The majority of resources explain the application of PESTEL assuming their audience is business owners. This article adopts an alternative approach and below is the explanation of the framework Application of PESTEL can be facilitated via the following steps: Step 1: Data Collection
Bajaj Auto Ltd. was selected for this analysis and data relevant to it was gathered from various sources. The data included but was not limited to Company’s annual report, company’s official website, some websites that better explain PESTLE analysis, online versions of the popular business journals in India such as Business Today, Forbes India, Inc. India, Business World etc.
Step 2: Deciding which factors to discuss
There is a vast range of political, economic, social, technological, environmental and legal factors that affect the company that has been chosen for the analysis and discussion about all of them in a paper isn’t feasible. Hence, the most significant factors for your analysis were chosen. Unfortunately, there is no general rule or a universal recipe as to what factors to discuss. The table below illustrates the most significant factors that affect business organizations listed in order of importance:
Political
Economic
1.
Macroeconomic climate in the country
1.
Government stability
2.
Inflation rate
2.
Level of bureaucracy
3.
Interest rate
3.
Extent of corruption
4.
Currency exchange rate
4.
The freedom of press
5.
Tax rates
5.
Home market lobbying and import restrictions
6.
Rate of unemployment
6.
Tax policies
7.
Cost of labor
7.
Trade control
8.
Availability of credit
8.
Tariffs
9.
Changes in disposable income of consumers
9.
Activities of trade unions
10. Government’s monetary and fiscal policies
Social
Technological
1.
Changing family values
1.
Industry-specific technological innovations
2.
Childless families
2.
Increasing popularity of e-commerce
3.
Same sex marriages
4.
Aging population
3. Increasing integration of IT and internet into business processes
5.
Population growth rate
6.
Health-consciousness of population
7.
Level of education
4.
Changes in technological infrastructure
5.
Rate of technological change
6.
Changes in communication infrastructure
8. Consumer attitude towards imported products and services 9.
Changes in consumer purchasing habits
10. Impact of religion and beliefs
Environmental
1. Increasing media coverage of environmental issues
Legal
1.
Trade regulation/de-regulation
2.
Climate change
2.
Regulation of competition
3.
Global warming
3.
Anti-trust rules and regulations
4.
Environmental pollution
4.
Discrimination law
5.
Copyrights, patents and intellectual property law
6.
Data protection law
7.
Employee health and safety rules and regulations
5. Impact of activities of non-government environmental organizations 6.
Ozone de-layering
7.
Consumer attitudes towards ‘green’ products
Step 3: Writing
Each of the point above mentioned need not be discussed and only the critical ones will be discussed keeping in mind the length of this paper. From the above table first 5 points will be taken and enlisted in the form of a table which will be followed by discussion of each individual factor listed.
Political
Economic
1.
Macroeconomic climate in the country
1.
Government stability
2.
Inflation rate
2.
Level of bureaucracy
3.
Interest rate
3.
Extent of corruption
4.
Currency exchange rate
4.
The freedom of press
5.
Tax rates
5.
Home market lobbying and import restrictions
Social
Technological
1.
Changing family values
1.
Industry-specific technological innovations
2.
Childless families
2.
Increasing popularity of e-commerce
3.
Same sex marriages
4.
Aging population
3. Increasing integration of IT and internet into business processes
5.
Population growth rate
4.
Changes in technological infrastructure
5.
Rate of technological change
Environmental
Legal
1. Increasing media coverage of environmental issues
1.
Trade regulation/de-regulation
2.
Regulation of competition
2.
Climate change
3.
Anti-trust rules and regulations
3.
Global warming
4.
Discrimination law
4.
Environmental pollution
5.
Copyrights, patents and intellectual property law
5.
Impact of activities of non-government
Current Status
The Indian two wheeler industry is current bright spot in the automobile industry. After worst recession in calendar year 2008, the two-wheeler industry bounced back quickly, consistently recording y-o-y growth from February 2009 onwards.The two-wheeler industry has consistently improved on sequential basis as well as y-o-y basis after falling down to levels of 5,52,058 two wheelers sold in December 2008 to 808075 two wheelers in May 2009. In FY09, the total 2wheeler sales grew by 5 per cent from 8068991 vehicles in FY08 to 8,44,1844 vehicles in FY09. The growth in two wheelers were triggered by couple of factors such as 4 per cent excise duty cut announced in stimulus package in December 2008, fuel price reduction of Rs 5 per litre in petrol and Rs 2 per litre in diesel as well as the unaffected and untapped demand from the rural market. In case of 3 wheeler industry, the domestic sales have perked up from low of 19048 vehicles in Dec 2008 to 30036 vehicles in May 2009 post excise duty cut of 4%. However, 3wheeler industry continues to struggle with lack of credit as well as Light commercial vehicles eating into its marketshare especially in goods carrier segment. Nevertheless, Bajaj Auto is launching 2 three wheelers in FY10 – one in goods carrier and other in passenger carrier.
Industry expectations
•
Retain the existing excise duty on 2 & 3 wheeler at 8%. Release a measure to boost retail lending in big way in PSU banks
•
Abolish fringe benefit tax.
•
• •
•
Analysts/market expectations Reduce interest rates on auto loans and credit availability on 2-wheeler and 3 wheeler loans. The lack of finance and high interest rates limits the growth in both the 2 wheeler and 3 wheeler industry. Retain the existing excise duty on 2 & 3 wheeler at 8%. The reduction in the excise duty to 8% enabled the revival of the 2 & 3 wheeler sales. Thus retention of the same will provide support for 2 & 3 wheeler industry to continue to grow.
Companies to watch
Bajaj Auto, Hero Honda, TVS, Mahindra & Mahindra Outlook
Currently, the 2 wheeler industry is thriving thanks to excise duty cut and conscious effort of players to focus on the untapped unaffected rural demand and premium bike segment. In contrast, 3 wheeler industry's growth is still muted despite revival from the downtrend. A focus on credit availability to 2 & 3 wheeler loans and lowering of interest rates could boost their sales especially the 3 wheeler industry's. If the customs duty on steel, aluminium etc is raised, then it will be negative for the auto industry in general and 2 & 3 wheelers in particular.
Bajaj Auto limited is India’s leading two-wheeler manufacturer. Its expertise lies in making bikes,
sports bikes, racing bikes, scooter and motorcycle. Bajaj Auto is a part of Bajaj group. Its founded by Jamnalal Bajaj at Rajasthan in the 1930s.Bajaj Auto was founded on 29 November,1945 as M/S Bachraj trading limited. It started off by selling imported two and three wheelers in India. It obtained the license from government of India in 1959 to manufacture two and three wheelers and it went public in 1960.Bajaj Auto is the world’s third largest manufacturer of motorcycles and second largest in India. Bajaj Auto has in all three plants, two at Waluj and Chakan in Maharashtra and one plant at Pant nagar in Uttaranchal, western India. The Bajaj Group is amongst the top 10 business houses in India. Its footprint stretches over a wide range of industries, spanning automobiles (two wheelers manufacturer and three wheelers manufacturer), home appliances, lighting, iron and steel, insurance, travel and finance. The group's flagship company, Bajaj Auto, is ranked as the world's fourth largest three and twowheeler manufacturer and the Bajaj brand is well-known across several countries in Latin America, Africa, Middle East, South and South-East Asia. Founded in 1926, at the height of India's movement for independence from the British, the group has an illustrious history. The integrity, dedication, resourcefulness and determination to succeed which are characteristic of the group today, are often traced back to its birth during those days of relentless devotion to a common cause. Jamnalal Bajaj, founder of the group, was a close confidant and disciple of Mahatma Gandhi. In fact, Gandhiji had adopted him as his son. This close relationship and his deep involvement in the independence movement did not leave Jamnalal Bajaj with much time to spend on his newly launched business venture. We are celebrating 125th Birth anniversary of Shri. Jamnalal Bajaj on 4th of November 2014. His son, Kamalnayan Bajaj, then 27, took over the reins of business in 1942. He too was close to Gandhiji and it was only after Independence in 1947, that he was able to give his full attention to the business. Kamalnayan Bajaj not only consolidated the group, but also diversified into various manufacturing activities. The present Chairman of the group, Rahul Bajaj, took charge of the business in 1965. Under his leadership, the turnover of the Bajaj Auto the flagship company has gone up from INR.72 million to INR. 120 billion, its product portfolio has expanded and the brand has found a global market. He is one of India’s most distinguished business leaders, bike manufacturer India and internationally respected for his business acumen and entrepreneurial spirit.
PESTLE analysis in Business Environment
Everyday our market is changing the way it is. Many new things are developed and in a matter of about some seconds, the whole scenario stands different in front of us. Among them, there are many things that we can control and then there are other things that fall beyond our control and those are called systematic factors. Systematic things happen in the environment we li ve in, the environment that surrounds us and many times they greatly influence us. Businesses are also influenced by the environment that they’re in and all the situational factors that determine circumstances from day to day. It is because of this, that businesses need to keep a check and constantly analyze the environment within which they run their trade and within which the market lays. A detailed analysis of the macro-environment or the environment as a whole is called PESTLE analysis, which precisely means a bird’s eye view of the PESTLE analysis business conduct. The PESTLE analysis ascertains for the managers and the strategy builders as to where their market currently stands and where it will head off in the future. PESTLE analysis consists of components that influence the business environment and each letter in the acronym denotes a set of factors that directly or indirectly affect every industry. The letters denote the following things: P for Political factors: These factors take into account the political situation of a country and the
world in relation to the country. For example, what sort of government leadership is affecting what decisions of a country? All the policies, all the taxes laws and every tariff that a government levies over a trade falls under this category of factors. E for Economic factors: Economic factors include all the determinants of an economy and its
condition. The inflation rate, the interest rates, the monetary or fiscal policies, the foreign exchange rates that affect imports and exports, all these determine the direction in which an economy might move, therefore businesses analyze this factor based on their environment so as to build strategies that fall in line with all the changes that are about to occur. S for Social factors: Every country is different and every country has a unique mindset. These
mindsets cast an impact on the businesses and the sales of their products and services; therefore, PESTLE analysis includes these factors as well. The cultural implications, the gender and connected demographics, the social lifestyles, the domestic structures; all of these are studied by companies to understand the market and the consumer better. T for Technological factors: Technology greatly influence a business; therefore, PESTLE analysis
is conducted upon these factors too. Technology changes every minute and therefore companies need to stay connected along the way and integrate as and when needed. Also, these factors are
analyzed to understand how the consumers react to technological trends and how they utilize them for their benefit. L for Legal factors: Legislative changes occur from time to time and many of them affect the
business environment. For example, if a regulatory body would set up a regulation for the industries, then that law would impact all the industries and business that strife in that economy, therefore businesses also analyze the legal developments happening in their environment. E for Environmental factors: The location of countries influence on the trades that businesses
do. Adding to that, many climatic changes alter the trade of industries and the way consumers react towards a certain offering that is launched in the market. The environmental factors include geographical location, the climate, weather and other such factors that are not just limited to climatic conditions. These in particular affect the agri-businesses, farming sectors etc. The PESTLE subject should be a clear definition of the market being addressed, this is the followings: 1. 2. 3. 4. 5. 6. 7. 8.
A company looking at its market A product looking at its market A brand in relation to its market A local business unit or function in a business A strategic option, such as entering a new market A potential acquisition A potential partnership An investment opportunity
Macro environmental forces influences on Bajaj Auto Ltd are summarized with in following six categories to identify the key drivers for change. Political
In 2002, the Indian government formulated an auto policy that aimed at promoting integrated, phased, enduring and self-sustained growth of the Indian automotive industry Allows automatic approval for foreign equity investment up to 100% in the automotive sector and does not lay down any minimum investment criteria. Formulation of an appropriate auto fuel policy to ensure availability of adequate amount of appropriate fuel to meet emission norms Confirms the government’s intention on harmonizing the regulatory standards with the rest of
the world Indian government auto policy aimed at promoting an integrated, phased and conductive growth of the Indian automobile industry. Allowing automatic approval for foreign equity investment up to 100% with no minimum investment criteria. Establish an international hub for manufacturing small, affordable passenger cars as well as tractor and two wheelers. Ensure a balanced transition to open trade at minimal risk to the Indian economy and local industry. Assist development of vehicle propelled by alternate energy source. Lying emphasis on R&D activities carried out by companies in India by giving a weighted tax deduction of up to 150% for in house research and R&D activities. Plan to have a terminal life policy for CVs along with incentives for replacement for such vehicles. Promoting multi-model transportation and the implementation of mass rapid transport system. Economic
The level of inflation Employment level per capita is right. Economic pressures on the industry are causing automobile companies to reorganize the traditional sales process.
Weighted tax deduction of up to 150% for in-house research and R & D activities. Govt. has granted concessions, such as reduced interest rates for ex port financing. The Indian economy has grown at 8.5% per annum. The manufacturing sector has grown at 8-10 % per annum in the last few years. More than 90% of the CV purchase is on credit. Finance availability to CV buyers has grown in scope during the last few years. The increased enforcement of overloading restrictions has also contributed to an increase in the no. of CVs plying on Indian roads. Several Indian firms have partnered with global players. While some have formed joint ventures with equity participation, other also has entered into technology tie-ups. Establishment of India as a manufacturing hub, for mini, compact cars, OEMs and for auto components. Social
Since changed lifestyle of people, leads to increased purchase of automobiles, so automobile sector has a large customer base to serve. The average family size is 4, which makes it favorable to buy a four-wheeler. Growth in urbanization, 4th largest economy by ppp index. Upward migration of household income levels. 85% of cars are financed in India. Car priced below USD 12000 accounts for nearly 80% of the market. Vehicles priced between USD 7000-12000 form the largest segment in the passenger car market. Indian customers are highly discerning, educated and well informed. They are price sensitive and put a lot of emphasis on value for money. Preference for small and compact cars. They are socially acceptable even amongst the well off. Preference for fuel efficient cars with low running costs. Technological
More and more emphasis is being laid on R & D activities carried out by companies in India. Weighted tax deduction of up to 150% for in-house research and R & D activities.
The Government of India is promoting National Automotive Testing and R&D Infrastructure project (NATRIP)to support the growth of the auto industry in India Technological solutions help in integrating the supply chain, hence reduce losses and increase profitability. Customized solutions (designer cars, etc. can be provided with the proliferation of technology Internet makes it easy to collect and analyze customer feedback With the entry of global companies into the Indian market, advanced technologies, both in product and production process have developed. With the development or evolution of alternate fuels, hybrid cars have made entry into the market. Few global companies have setup R &D centers in India. Major global players like Audi, BMW, Hyundai etc. have setup their manufacturing units in India.
Environmental
Physical infrastructure such as roads and bridges affect the use of automobiles. If there is good availability of roads or the roads are smooth then it will affect the use of automobiles Physical conditions like environmental situation affect the use of automobiles. If the environment is pleasant then it will lead to more use of vehicles. Technological solutions help in integrating the supply chain, hence reduce losses and increase profitability. With the entry of global companies into the Indian market, advanced technologies, both in product and production process have developed. With the development or evolution of alternate fuels, hybrid cars have made entry into the market. Few global companies have setup R &D centers in India. Major global players like Audi, BMW, Hyundai etc. have setup their manufacturing units in India. Legal
Legal provision relating to environmental population by automobiles. Legal provisions relating to safety measures.
Confirms the government’s intention on harmonizing the regulatory standards with the rest of
the world Indian government auto policy aimed at promoting an integrated, phased and conductive growth of the Indian automobile industry. Establish an international hub for manufacturing small, affordable passenger cars as well as tractor and two wheelers. Ensure a balanced transition to open trade at minimal risk to the Indian economy and local industry.
Bajaj is India’s largest automobile manufacturer. It manufactures and sells motor cycles, three-
wheeler vehicles, and spare parts in India and internationally. The company offers its twowheeler products under the Avenger, Pulsar, Discover, Platina, KTM, CT, Boxer, and Ninja brand names. The company sells its products and services through a network of dealers and distributors. It believes in providing the customer “VALUE FOR MONEY, FOR YEARS” through their products & services. Quality, safety & service has been given as much considerations as productivity, cost & delivery. The strength of the company is its quality products, excellence in engineering and design, and its ability to delight the customers. The Pulsar, introduced in November 2004, is continually dominating the premium segment of the motorcycle market, helping to maintain the market superiority. Some of the recommendations that can be made to the company after this analysis are as follows: • • • •
• • •
Company should keep focusing on the fast-growing motorcycle segment. Strengthen its position in ungeared segment. Concentrate on JV’s for techno needs. Look to expand their base outside further. It already had a strong presence in Africa and South Asian Countries. Concentrate on Blue Ocean of Second-hand Bike Market. Aggressive Launch its new Low-Cost Car. Focus on Easy Credit Lending - In the present economic crisis, Bajaj can utilize its subsidiary, Bajaj insurance in coming up with schemes that will help consumers buy two wheelers on friendly terms.
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