MANAGEMENT SPECIAL...STRATEGY My Way Or The Highway

 My Way Or The Highway

Anand Mahindra and Rajiv Bajaj have chosen two contrasting strategies to grow their automotives business: one believes in being present in various segments of mobility; the other is fanatically focused on the single segment of mobikes. Both may be right

“Stick to the knitting. Except for one or two notable exceptions, for example, Warren Buffett’s Berkshire Hathaway and Jack Welch’s GE, business diversity almost never works. Be particularly leery of the word synergy, which sounds great…” — Tom Peters & Robert H. Waterman in In Search of Excellence

“Confident brands continuously evolve…Status quo is not an option. There are 10 ways to successfully extend a brand” — Brand extension guru John Parham, co-founder of Parham Santana, an agency that specialises in brand extensions.

    Anand Mahindra doubtless has great respect for the bestselling author of business management practices, but he clearly has his own ideas on Peters’ advice of “staying with the business you know.” A company that started out as a manufacturer of mainly utility vehicles and tractors today straddles the entire mobility spectrum with a presence in two-wheelers, three-wheelers, sedans, electric cars, pick-ups, light trucks, heavy trucks, boats and even aeroplanes — virtually everything that moves with an engine. (Outside of mobility, the Mahindra & Mahindra — M&M — group has also built size and scale in information technology, financial services, real estate and leisure and hospitality among other sectors). “What we’re attempting is to create a total mobility brand called Mahindra that will be synonymous with mobility,” says the M&M chairman.

    Cut to the Pune-headquartered Bajaj Auto Ltd (BAL), whose managing director Rajiv Bajaj firmly believes in Peters’ credo of sticking to the knitting and that “nothing screws up a successful business more than hyperfast growth.” In the process of staying with the business of motorcycles that he not just knows but eats, drinks and breathes, Bajaj has dispassionately got rid of scooters, a product segment whose future he does not believe in but one that his father did and was emotionally attached to. True, BAL has three-wheelers in the market — and soon an improved version with four wheels — but as far as Rajiv Bajaj is concerned, BAL is largely a focused producer of powerful and stylish bikes. “When markets are un-evolved and competition is mild, it’s possible for one brand to participate with success in diverse categories. But when market evolution and competitive intensity reach a certain level, brands have to specialise to stand out,” explains the managing director of India’s second-largest two-wheeler maker.

    Two of India’s most respected CEOs are chasing growth in the rapidly-evolving Indian automobile sector with two contrasting strategies. One firmly believes that his brand is rugged enough to be stretched across a wide span of businesses; the other single-mindedly focuses on one product segment, in which he is not averse to having multiple brands (like Pulsar, Discover and KTM).

    “M&M follows classical marketing strategy: there is nothing wrong in diversifying a business, although the brand needs to stay focused,” says Pradeep Saxena, automotive executive director, TNS, a market research firm. Mahindra, for his part, is conscious of that focus. He says that, while he may be present across sectors of mobility, the common and core attributes of the Mahindra brand won’t change; they will always be centred on performance, ruggedness, reliability, and resilience — all at honest and affordable prices.

    Bajaj has chosen the attribute of power to differentiate him from Honda (known for quality), Hero (mileage) and TVS (affordability). He justifies the company’s sharp focus on just motorcycles by comparing it to a sportsperson or a doctor or an artist seeking to be the best in the world. “He or she has to choose one thing to excel in while sacrificing the rest; it’s no different for brands that aspire for global leadership.”

    Bajaj is pleased that he is already earning the fruits of focus. “Being a motorcycle specialist has made Bajaj the world's most profitable automotive company, its third largest motorcycle maker, and an Indian auto company that exports a third of its production — these rewards of specialisation are not realised by brands whose strategy is to be a generalist,” he offers.

    However, Bajaj is in no mood to celebrate those victories, what with the competition getting more challenging by the day. His company is sandwiched between a leader that’s way ahead in market share — Hero Moto Corp accounts for more than one of every two two-wheelers sold in India — and a resurgent Honda that has overtaken TVS to get to No 3; the Japanese giant’s Indian two-wheeler operation is now hot on the heels of BAL.

    Mahindra’s edge is that he has his wheels in various baskets, but the challenge to be a player with decent scale and share in each of these segments is not a small one. “M&M should be worried about brand dilution; for instance, it may be difficult for them to sell highend motorcycles,” said Deepesh Rathore, managing director of HIS Automotive India.

    TNS’ Saxena adds that if a consumer thinks of UVs or tractors, his first thought will be that of a Mahindra product. “But if a consumer thinks of a scooter, he would never think of Mahindra. M&M should consciously start building ‘product brands’ like what Unilever has done with Lux and Lifebuoy,” explains Saxena.

    The M&M chairman is doing exactly that. And he’s in no great hurry. “Establishing ourselves in any new customer segment can take its time. A decent market share in trucks, two-wheelers, cars — say 8%-10% — will provide a lot of visibility to the brand and make these segments an important part of M&M’s portfolio.”

Lijee Philip ET121003