Find out where your Java is installed, it will either be in C:\Program Files\Java or C:\Program Files (x86)\Java by default, unless you changed it of course.
Go to Control Panel, then System, then Advanced system settings on the left had side. Advanced tab, Environment Variables... near the bottom. On the bottom half under System variables, hit the New... button.
If your Java is under Program Files, then fill the two boxes like:
PATH
C:\Program Files\Java\jre7\bin
If your Java is under Program Files (x86), then enter the following into the fields:
PATH
C:\Program Files (x86)\Java\jre7\bin
Hit OK, OK, OK, and then launch the batch file. The reason it isn't working is because the Java installer doesn't create the variable, therefore, command prompt doesn't know what Java is. So you're telling it to run Minecraft through Java, but it doesn't know where Java is.