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Suzlon Wind Power Company Analysis.

Extracts from this document...

Introduction

Group: Q1 Section: 3 About the Company Suzlon Energy is a global wind power company based in India. Suzlon is a market leader in Renewable Energy Resources segment. It specializes in providing total solutions in Wind Power Generation with cohesive integration of consultancy, design, manufacturing, installation, operation and maintenance services. Currently, Suzlon is ranked as fifth leading wind turbine manufacturer in the world. Suzlon delivers end-to-end wind power solutions from assembly, installation to commissioning. The company manufactures blades, generators, panels, and towers in-house and state-of-the-art large or offshore turbines through its subsidiary REpower. The company is integrated downstream and delivers turnkey projects through its project management and installation consultancy, and operations & maintenance services. Suzlon is a multinational company with offices, R&D and technology centres, manufacturing facilities and service support centres spread across the globe. History The seeds of Suzlon were sown by Mr. Tulsi R. Tanti?s venture into the textile industry. Faced with soaring power costs and the infrequent availability of power, he looked to wind energy as an alternative. Beginning with a wind farm project he set forth to acquire the basic technology and varied expertise to set up Suzlon Energy Limited - India?s first home-grown wind technology company. Suzlon began with a wind farm project in the Gujarat state of India in 1995 with a capacity of just 3 MW and has, at the end of 2007, supplied over 6000 MW world over. Suzlon has grown more than 100% annually and registered a 108% growth, in the financial year ended 2007- over twice the industry average - in a supply restricted environment. Today Suzlon is being ranked the 5th leading wind power equipment manufacturer with a global market share of 10.5%. The company seized market leadership in India over 8 years ago, and has consistently maintained over 50% market share, installing over 3000 MW of wind turbine capacity in the country. ...read more.

Middle

Thus overall we can say that the wind turbine is a unique product and the substitution from the substitute product is low. Other Factors: 1. Option of other renewable energy sources 2. High Switching cost 3. Comparable costs with substitute product s 1. The threat of the entry of new competitors (Medium) Since it is a capital intensive industry so only major players can afford enter the market either individually or in the form of JVs. 1. High entry barrier It requires a huge amount of investment to start the business and the payback period is also long about 8 years. So for every players its not easy from this highly capital intensive industry. So the threat from the new entrants is low. 1. Favourable government policies Many government policies endorse local renewable resources as alternatives to fossil fuels. In this case the entry of potential entrants is high. 1. Capital intensive The capital requirement in wind turbine industry is very high as to set up manufacturing facility of rotor blades set of 350 set is 65 crores. (2009 data). Similarly to set up gear box unit requires 100 million dollars. Thus potential entry of the new company is LOW. Other Factors: 1. High entry barrier 2. Favourable government policies 3. Capital intensive 1. The Intensity of competitive rivalry (low) Although the market is dominated by two players but the extent of competitive rivalry can be termed as medium because there is a scope for foreign players as government has increased the FDI limit to &4% from 51%. Differentiation Suzlon has differentiated itself and got the benefit of vertical integration through backward integration in terms of in house production. So from this we can say that the rivalry among the competitors is medium to low. Rivalry using the Price cuts: No company is using the price cut strategy hence there is no effect of this strategy. ...read more.

Conclusion

Suzlon?s operations and maintenance efforts ensure energy yield optimization in accordance with onsite climate and grid conditions. We also provide detailed monitoring services for every wind turbine erected. This combined synergy of Suzlon?s business units and customer support network succeeds in providing Suzlon?s customers with benefits that help satisfy their expectations of a global wind energy solutions provider. Overview of the strategies that worked: 1. Reverse Outsourcing 2. Technical expertise built on licensing agreement 3. Vertical Integration and Acquisition 4. Integrated manufacturing capability 5. Innovation practices for transnational firms 6. Maintain control of intellectual property rights 7. Wide range of offerings Recommendations: ? Sustained R&D efforts ? Synergize with re-power ? Reduction of inventory levels and focuses on improving collections ? Focus on off-shore markets ? Special attention to Chinese market ? Leveraging on cost advantage through backward integration ? Control on supply chain Operational efficiency of Suzlon To improve the operational efficiency of Suzlon must focus of reduction in cost of goods sold. As of now, year on year the increase in sales turnover has been lower when compared to increase in cost of goods sold. The rise in Cost of goods has accrued due to escalating raw material prices. Hence, to maximize earnings Suzlon needs to tweak its supply chain. Furthermore, an increase in the turbine prices will not be possible owing to intense competition so effective utilization of resource is the need of the hour. Adapting to business environment To adapt to rapidly changing business environment, Suzlon has to develop state of the art products. So, investment in R&D activities is essential. By acquiring RE power, Suzlon can leverage its expertise in off-shore wind energy market to enhance its presence in Europe Company should look beyond US and China and tap markets like Ukraine, Bulgaria and Australia Future: Future is optimistic, given the increased awareness about benefits of renewable energy and ambitious renewable energy targets by global governments. Through its diverse presence across geographical locations, Suzlon can leverage the global market. Although it?s difficult to comment on the short term growth prospects but long term prospects are definitely bright. ...read more.

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