01 Jan 2005

Rahul Bajaj, MBA 1964

2005 Alumni Achievement Award Recipient
Re: Rahul Bajaj (MBA 1964)

Chairman & Managing Director, Bajaj Auto Ltd.

In the 1970s, India was a socialist state, a land of overarching regulation rather than of opportunity. "As a result, there was no entrepreneurship, and businesses couldn't do a thing without government approval," recalls Rahul Bajaj, a member of one of India's most prominent families, who became CEO of Bajaj Auto Ltd. (BAL) in 1968 at the age of 30.

In this environment, the company, now the world's fourth-largest maker of motorized scooters, three-wheel vehicles, and motorcycles—India's most common forms of transportation—was limited to producing just 20,000 units a year. Supply and demand were completely out of sync. Once they placed their order, customers had to wait ten years to receive it.

Finally, Bajaj, whose grandfather had been known as the "fifth son" of Mahatma Gandhi and whose parents and grandparents had spent time in British prisons for the sake of Indian independence, decided to engage in his own form of disobedience. "To lower my costs while improving the price and quality of my products, I needed economies of scale," he explains. "Ignoring a government regulation, I increased my volume by more than the permitted 25 percent of my licensed capacity. If I had to go to jail for the excess production of a commodity that most Indians needed, I didn't mind."

Bajaj's antiestablishment views prevailed, and by the beginning of the 1980s, Bajaj Auto had increased its annual production to 172,000 vehicles. Today, with revenues of $1.5 billion and a market capitalization of $3 billion, the company sells nearly 2 million vehicles per year in India and other developing countries in Africa, Latin America, and Southeast Asia.

"Given my family background, I knew I wanted to be a businessman by the time I was about 12," says Bajaj. His grandfather had bought a steel mill and started a sugar mill, and in 1945 his father founded Bajaj Auto, now the crown jewel in the Bajaj Group, which numbers almost thirty companies in a variety of industries.

Graduating in 1958 from St. Stephen's College in Delhi with an honors degree in economics, Bajaj underwent on-the-job training for four years at two of the group companies. During that time, he also earned a law degree in Bombay (now Mumbai).

By the 1990s, Bajaj Auto faced problems worthy of an HBS case study. A combination of the company's ramped-up production and the entry-thanks to some early liberalization measures introduced by the then Prime Minister, Rajiv Gandhi-of Japanese manufacturers such as Honda, Yamaha, and Suzuki changed the dynamics of the marketplace completely. Waiting lists eventually gave way to overcapacity, and a new generation of motorcycles drove the sale of scooters into a downhill skid that bottomed out in 2000-01. "We remained profitable," notes Bajaj, "because we quickly realized we needed to restructure our product line and increase the productivity of our workforce."

Through a technological collaboration with Kawasaki, BAL improved the variety and quality of its motorcycles. The company also altered its supply-chain management, turning to outsourcing for almost every component used on the assembly line and relying on just-in-time deliveries several times a day. "We went through the difficult process of winnowing our major suppliers from 900 to 200, with whom we now work as partners," Bajaj says.

Changes in employee management and training had an enormous impact. It took 22,000 workers to produce 1 million vehicles in 2000, for example, but only half that number to make 1.8 million four years later.

In addition, Bajaj Auto has consistently invested in R&D. The company's ability to develop products desired by the customer has been an important source of confidence for the future.

What has also remained constant throughout Bajaj's forty years at BAL has been the company's commitment to corporate social responsibility. Through philanthropic trusts and foundations, Bajaj Auto supports community and rural development in the areas where its workers live, funding efforts, for instance, in primary school education, agriculture, and health care.

As a longtime leader of his country's business community, Bajaj is the only top executive to have served two terms as president of the Confederation of Indian Industry, which represents over 5,000 companies from India's private and public sectors. In that role in 1994-95, he chaired a blue-ribbon committee of twenty CEOs who wrote India's first report on the principles of good corporate governance-principles that were the forerunners of those later adopted by the Securities and Exchange Board of India and the nation's stock exchanges. Bajaj's expertise in these matters has also been tapped by the New York Stock Exchange, where he serves as a member of its International Advisory Committee. For his contribution to Indian industry, he was awarded the nation's third-highest civilian honor, the Padma Bhushan, in 2002.

Five years ago, Bajaj began to delegate many of his responsibilities to a team of younger executives. The final stage of that plan took place last April, when he was succeeded as managing director and CEO by his older son, Rajiv.

Bajaj acknowledges there's still much he wants to do, particularly as India takes its place as a world economic power. "We still have to address some lingering problems in my country," he says, "including an inadequate infrastructure, inflexible labor policies, and too much bureaucratic red tape. But in the long run, India will succeed, since the entrepreneurial spirit and capability of the Indian people is second to none."

Featured Alumni

Featured Alumni

Class of MBA 1964, Section F

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