This is the maximum numbers selling bike from Bajaj stable. Will they be doing a right thing by withdrawing Boxer (100 cc platform) from the market? Will this not make the market virgin for Hero Honda CD Dawn (100 cc)?
Toyota suffered heavily by withdrawing Qualis from the market heavily. If Bajaj also is making the right move?
Apparently it seems yes, this move may be wrong, but if we explore deeper into it, we will see that this is the right move.
Today this segment of the bikes is witnessing the worst kind of competition. Margins are thinner than wafer and only selling proposition left with the marketers' is "Price". This does not add anything to the bottom-line, but it simply keeps your top-line look attractive. At the end of the year, your profitability does not improve.
When the products are being sold in the market on the basis of only one P of Marketing Mix i.e. Price, then it is no more a product. It is a commodity.
Commodities leave no scope for Branding and hence no Brand Equity. Hence Bajaj is doing the right thing by withdrawing itself from the commodity business and letting the competition spoil their bottom-lines.
The success of other brands of Bajaj, has proven their Marketing acumen. This is high time that they need to create new segments by launching new platforms and strengthen their position in the market rather than fighting a losing battle.
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2 comments:
Well from a finance perspective i think numbers matter quite a bit. You have to continue with the few things even though they are not adding anything to your bottom line. After withdrawing Boxer, Bajaj's market share will go down and the markets and stockholders won't like that. I think they can avoid Toyota's classical mistake by first successfully launching a new bike in the segement and then may be gradually they can reduce the production and when the new bike has set the foothold, finally withdraw Boxer form the market.
Thanks for your comments Goldy.
Your financial analysis of the situation does have substance. Let us take into account some more facts. Cost of selling keeps on increasing for a highly fought segment.
Further when the product (or brand) is on the last stage of its Life Cycle, it is better to divest from that.
To keep it alive, you have to spend more and your returns will be minimal. Further from competitive point of view let us change the rules of game, by shifting to altogether a new market segment. Let the competitors fight the losing battle.
Qualis was not having any competition (Sumo was pretty weak). Further it was not straining the bottomline of the company. It was done only to change the image of Toyota.
People have started using Qualis mainly for taxi purpose and that image was not acceptable to Toyota.
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