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KTM and Bajaj: An Austrian-Indian Partnership in the Motorcycle Industry

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Internationalization of Business

Part of the book series: MIR Series in International Business ((MIRSIB))

Abstract

Austria-based motorcycle manufacturer KTM has managed to become the number one European seller of motorcycles. To achieve this goal, the company has chosen to engage in a joint venture with Indian motorcycle manufacturer Bajaj Auto Limited (BAL). The present case study provides an overview of KTM’s internationalization path and highlights the main motives, objectives and outcomes of the Austrian-Indian partnership. The case study outlines the internationalization of KTM in the context of an overview of India’s economy, the Indian motorcycle industry and India’s key players in the industry.

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Notes

  1. 1.

    In the present case study, the authors use the terms motorbike and motorcycle synonymously.

  2. 2.

    See Ihle (2013, pp. 7–9).

  3. 3.

    See Chung and Turpin (2004).

  4. 4.

    See Sapp et al. (2007).

  5. 5.

    See Zietsma and Wong (2005).

  6. 6.

    See Stoffregen (2012, p. 9).

  7. 7.

    See Schäfer (2002, p. 9).

  8. 8.

    See Pierer as cited in Anonymous (2015).

  9. 9.

    See Naganathan and Gunupudi (2010).

  10. 10.

    Although Suzuki and Kawasaki lag far behind Honda and Yamaha, the term “big four” is commonly used in the industry. See, for instance, Pashley (2008) or Zühlke (2007).

  11. 11.

    See Sapp et al. (2007).

  12. 12.

    See Anonymous (2017b).

  13. 13.

    See Lindner (2015).

  14. 14.

    See Zietsma and Wong (2005).

  15. 15.

    See Anonymous (2017d).

  16. 16.

    See Hamilton (2013).

  17. 17.

    See ACEM (2015).

  18. 18.

    See Fournier and Donada (2016), Götze and Rehme (2014).

  19. 19.

    See Kawasaki (2017), KTM (2017a).

  20. 20.

    These countries include: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam [see Kutschker and Schmid (2011), p. 188].

  21. 21.

    See KTM (2017a).

  22. 22.

    Pierer as cited in Anonymous (2015).

  23. 23.

    See Pierer et al. (2009).

  24. 24.

    See Gach (2014).

  25. 25.

    See Cathcart (1992), Pierer et al. (2009).

  26. 26.

    See Pleininger (2003).

  27. 27.

    See Delekat (2015).

  28. 28.

    See Pierer et al. (2009).

  29. 29.

    See Buchholz (2005), Möller (2005).

  30. 30.

    See Pierer et al. (2009).

  31. 31.

    See Atzesberger (2017), KTM (2017a).

  32. 32.

    See KTM Industries (2017c).

  33. 33.

    See KTM (2017b).

  34. 34.

    See KTM Industries (2017c).

  35. 35.

    See Pierer et al. (2009).

  36. 36.

    See Fuchs and Apfelthaler (2009, pp. 342–343).

  37. 37.

    See KTM (2017a), Pierer et al. (2009).

  38. 38.

    See Gluschitsch (2013).

  39. 39.

    Habsburg as cited in Wheeler (2013).

  40. 40.

    See Bayer and Doll (2013), Jandrasits (2013).

  41. 41.

    See KTM (2017a).

  42. 42.

    See KTM (2012), KTM Industries (2017c).

  43. 43.

    See Neff (2017), Zingel (2014).

  44. 44.

    See Banerjee (2013).

  45. 45.

    See Kale and Anand (2006), UNCTAD (2016b).

  46. 46.

    See Auswärtiges Amt (2017).

  47. 47.

    Examples include Bosch, Samsung and Siemens. See Kale and Anand (2006), McKinsey and Company (2016), UNCTAD (2013).

  48. 48.

    See UNCTAD (2016a).

  49. 49.

    See RSM Consulting (2016).

  50. 50.

    See Auswärtiges Amt (2017).

  51. 51.

    See IBEF (2017), Peermohamed (2013).

  52. 52.

    See SIAM (2017).

  53. 53.

    See Richter (2014).

  54. 54.

    See Bergthaler (2017), Fuchs and Apfelthaler (2009, p. 370).

  55. 55.

    See Richter (2014).

  56. 56.

    See George et al. (2006), Naganathan and Gunupudi (2010).

  57. 57.

    See SIAM (2017).

  58. 58.

    See Shah (2017).

  59. 59.

    See Doval (2010).

  60. 60.

    See Baggonkar (2015), Sen Gupta (2011).

  61. 61.

    See Hero MotoCorp. (2016).

  62. 62.

    See TVS Motors (2017).

  63. 63.

    See Anonymous (2017c).

  64. 64.

    See Banerjee (2013).

  65. 65.

    See Sharma (2011).

  66. 66.

    See Banerjee (2013).

  67. 67.

    See Bajaj Auto Limited (2016), KTM (2007).

  68. 68.

    See Zietsma and Wong (2005).

  69. 69.

    See Philip (2012).

  70. 70.

    See KTM (2016).

  71. 71.

    See KTM (2007).

  72. 72.

    See Reiter (2015).

  73. 73.

    See KTM (2007).

  74. 74.

    See Naganathan and Gunupudi (2010).

  75. 75.

    See KTM (2007).

  76. 76.

    See Haider (2014), KTM (2017a).

  77. 77.

    See Anonymous (2011), Bergthaler (2016).

  78. 78.

    A platform in the automotive industry refers to a common set of design, engineering and production over a number of various models. It is used to reduce costs and allows manufacturers to create different models from a design point of view with similar technical components [see Braess and Seifert (2013), pp. 155–158; Schmid and Grosche (2008), p. 153].

  79. 79.

    See Anonymous (2017a), Niyogi (2014).

  80. 80.

    See Philip (2012).

  81. 81.

    See KTM Industries (2017c).

  82. 82.

    See Philip (2012).

  83. 83.

    See Anonymous (2008).

  84. 84.

    See KTM (2016).

  85. 85.

    Trunkenpolz as cited in Wheeler (2014).

  86. 86.

    Pierer as cited in Reiter (2015).

  87. 87.

    See Kolar (2007).

  88. 88.

    Bajaj as cited in Anonymous (2017e).

  89. 89.

    See KTM Industries (2017b).

  90. 90.

    See Kshirsagar (2016).

  91. 91.

    See Suchde (2017).

  92. 92.

    See Niyogi (2014).

References

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Author information

Authors and Affiliations

  1. ESCP Europe Berlin, Berlin, Germany

    Stefan Schmid & Simon Mitterreiter

Authors
  1. Stefan Schmid
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  2. Simon Mitterreiter
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Corresponding author

Correspondence to Stefan Schmid .

Editor information

Editors and Affiliations

  1. ESCP Europe, Berlin, Germany

    Stefan Schmid

Questions

Questions

  1. 1.

    In International Business literature, the Uppsala approach is one of the most cited approaches for describing internationalization patterns. Please argue how far KTM’s internationalization corresponds to the Uppsala approach of internationalization, in terms of both the psychic distance chain and the establishment chain.

  2. 2.

    Joint ventures can be categorized in various ways. The following table illustrates an overview of possible types of joint ventures.

    1. (a)

      Please classify the joint venture between KTM and Bajaj according to the categories below.

Differentiation criteria

Characteristics

Number of cooperation partners

• Joint venture with one partner

• Joint venture with several partners

Field of cooperation

• Joint venture within one value chain activity

• Joint venture within several value chain activities

• Joint venture regarding all value chain activities

Location

• Joint venture established in the country of a partner

• Joint venture in a third country

Geographical field of cooperation

• Local joint venture for a specific country

• Joint venture for a specific region or the global market

Direction of cooperation

• Horizontal joint venture

• Vertical joint venture

• Concentric joint venture

• Conglomerate joint venture

Equity stake/voting share

• Equal share of partners

• Unequal share of partners

Duration of cooperation

• Joint venture with limited duration

• Joint venture without limited duration

  1. Source: translated from Kutschker and Schmid (2011), p. 889
  1. (b)

    From the perspective of KTM, please discuss the advantages and disadvantages of a joint venture compared to a fully owned subsidiary in a foreign country.

  2. 3.

    Joint ventures as a market entry strategy require careful planning and preparation. Among other things, the macro and the micro environment of the host country and the possible partners have to be assessed with due diligence.

    1. (a)

      Why did KTM choose India as a target market and especially Bajaj as a partner for joint venture cooperation? Please provide a coherent argumentation using tools (e.g., PESTEL Analysis, Porter’s Five Forces or the strength/weakness profiles of both partners) as a basis for your statements.

    2. (b)

      During the first 5 years of the joint venture, Indian Bajaj increased its financial commitment within the joint venture. Bearing in mind the macro environmental situation at this time, please argue what might have been the reasons and objectives for this decision.

  3. 4.

    After having established the joint venture with Bajaj in India, KTM’s management had to decide on future allocation strategies, i.e., opt for the centralization or decentralization of value chain activities.

    1. (a)

      Please analyse in general (i.e., independently from the KTM case) the coordination requirements that result from a (partial) decentralization of value chain activities.

    2. (b)

      Imagine you are a consultant working for the KTM executive board (“Vorstand”). Please prepare an executive presentation that offers the board concrete actions to efficiently deal with the partial decentralization of R&D and manufacturing from 2011 onwards. Please ensure to provide support for your recommendations with reasonable arguments derived from your knowledge about the motorcycle industry and the companies KTM and Bajaj.

  4. 5.

    Imagine that you are back in 2007/2008 and that you are member of the board responsible for production in KTM. Rumours within your staff stoke fears of massive job losses at headquarters in Upper Austria owing to the recently signed joint venture contract with Bajaj. Employees and trade unions fear the partial outsourcing of motorcycle production to Bajaj’s production plant in Pune/India. Please prepare a convincing speech to your local employees to reduce their fears of job losses.

  5. 6.

    Having recently graduated, you are the new personal assistant to Stefan Pierer, CEO of KTM (“Vorstandsvorsitzender”). He asks you for an outlook of Southeast Asia’s motorcycle markets until 2027 and the implications for KTM. Please develop a first draft of the new strategy “KTM in ASEAN markets until 2027”. Please focus not only on target market strategies but also on market entry strategies, timing strategies, allocation strategies and coordination strategies. Please provide a consistent, well-structured proposal for the future.

Please note that, for some of the questions, the case study is only a starting point. You will have to search for additional information to answer the questions.

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Schmid, S., Mitterreiter, S. (2018). KTM and Bajaj: An Austrian-Indian Partnership in the Motorcycle Industry. In: Schmid, S. (eds) Internationalization of Business. MIR Series in International Business. Springer, Cham. https://doi.org/10.1007/978-3-319-74089-8_5

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