New Delhi: An effort by Rajiv Bajaj, managing director of Bajaj Auto Ltd, to associate the Bajaj brand name exclusively with the motorcycles made by his company has run into resistance from some members of the family who control group firms that sell products ranging from hair oil to home appliances.
At a board meeting of Bajaj Auto, India’s second biggest motorcycle maker, in September, group firms such as Bajaj Electricals Ltd, Bajaj FinServ Ltd and Bajaj Allianz Life Insurance Co. Ltd were asked to consider evolving their own brand names.
The proposal by management consultant Jack Trout of Trout and Partners had few takers.
“Mr Trout did make a presentation during our board meeting in September. The composition of our board also includes members of other group companies. So the message has been conveyed to them,” a person familiar with the development said on condition of anonymity.
But members of the extended Bajaj family aren’t happy with the proposal because they believe other group companies had played an equally important role in building the Bajaj brand name over time, the same person said.
“Bajaj Electricals has been using the Bajaj brand much before any other group company i.e. since the early 1960s. We sell 70 million units of home appliances every year. So Bajaj cannot go away at Bajaj Electricals,” Shekhar Bajaj, chairman and managing director of Bajaj Electricals, said in a phone interview.
“Moreover, Bajaj logo, the smaller one, is registered for Bajaj Electricals. Gradually, when other group companies came up, they started using the same logo. We did not have problem as we thought they are group companies.”
When asked what options are left with Rajiv Bajaj, who is trying hard to project motorcycles as a separate brand, Shekhar Bajaj replied: “That is his problem. You should ask him.”
“As a member of Bajaj Auto’s board, I would like to strengthen the already established brands,” he said. “Because when you think of Pulsar, you think of motorcycles, you don’t think of home appliances.”
The Bajaj group, headed by member of Parliament Rahul Bajaj, is one of the oldest business conglomerates in India, comprising 25 companies.
The group has a turnover of Rs 28,000 crore and employs at least 36,000 people.
Bajaj Auto, led by Rahul Bajaj’s younger son Rajiv, is the group’s flagship company and one of the world’s leading two- and three-wheeler manufacturers. The company’s turnover for fiscal 2010 was Rs 12,043 crore.
Bajaj Electricals, led by Rahul Bajaj’s cousin Shekhar Bajaj, is a major player in the home appliances segment, while Bajaj FinServ and Bajaj-Allianz are led by Sanjiv Bajaj, Rahul Bajaj’s elder son.
Bajaj FinServ is a financial services firm; Bajaj-Allianz is an insurance provider, dealing chiefly in life and general insurance.
The erstwhile Bajaj Auto Ltd was de-merged in accordance with a 2007 Bombay high court order, under which its manufacturing operations were transferred to the new Bajaj Auto Ltd, while its strategic business, comprising wind farming and financial services, was vested with Bajaj FinServ.
All the businesses and all properties, assets, investments and liabilities of the erstwhile Bajaj Auto Ltd, other than the manufacturing undertaking and the strategic business undertaking, are now with Bajaj Holdings and Investment Ltd (BHIL).
Post-demerger, BHIL holds 30% shares each in Bajaj Auto and Bajaj FinServ.
Trout said there are several Indian groups whose names are identified with product brands; in the case of Bajaj, the association is with two-wheelers.
Such groups, while diversifying, need not carry the flagship brand to all the new areas, be it finance, insurance or electricals.
“This world (motorcycle) in India is becoming much more competitive,” Trout said in an interview on 17 September.
“And I guess my point is that the non-motorcycle pieces of the company (need) to be as competitive as they have to be in the other businesses.”
To a question whether the other firms of the group have been told to consider the idea, Rajiv Bajaj said in an email response: “That was the essence of Mr Trout’s recommendation to them.”
“It is up to each company to decide whether to accept or reject his idea,” he added. “It depends on what the others decide.” However, Bajaj said no timeline had been set for a decision on the proposal.
Rajiv Bajaj had previously said the company’s brand is too diffused, covering everything from electric heaters and hair oil to insurance and financial services.
Correcting that problem is the biggest opportunity for the company.
Trout said: “I think they have to look at their own brands: Will I do better with my own brand name and find a way to differentiate it against my competition? I am not here to force them to change anything. I am just saying that it may make more sense for the future as India develops.”
Experts are divided on the issue. Some say that the proposal, if implemented, will favour Bajaj Auto; others think it will give an opportunity to other group firms to grow.
“It is because of the group’s motorcycles that people correlate with its other products, especially in the rural areas. If this happens, it will help Bajaj Auto a bit but will definitely hamper the prospects of other group companies,” said Prayesh Jain, a research analyst at India Infoline.
Another expert says a lot of businesses under a single brand makes it less powerful and is confusing for consumers. “Brand is inversely proportional to its scope. So, the lesser the scope of the brand name, the greater is its strength,” said Rajesh Kochar, a vice-president at Contract Advertising.
“This step will certainly help motorcycles but as far as other companies are concerned, it depends how they rebrand themselves and the value creation they do after that,” he said.
An expert at a leading consultancy firm, who spoke on condition of anonymity, said that with times changing, Trout’s proposal makes sense.
“As companies evolve and grow, some kind of reorganization is necessary to align the resources—financial and human. As you become large, you need to focus on your core business and need to sharpen your brand image,” he said.