a case study about bharat forge and Suzlon

Shruthi Chandrappa (A32, Banner id-03165713), Ajay Rajendra (A3, Banner id-03165721), Aanup Praatam (A1, Banner id-03172668), Pratik Jain Ramesh (A24, Banner id-03164657)
“ ECON 634 Bharat Forge and Suzlon Case Study”
Bharat forge was started in 1961 with a government mandate to produce engines to meet India’s domestic automotive production needs. Bharat forge was established under a socialist environment and substantially grew I the 70’s and become the undisputed domestic leader in 1980. It’s the liberalization of Indian economy in 1991; with the changing economy it was the time for Bharat Forge to transform itself from a labor intrinsic company to a highly mechanized and efficient forging company. Mr. Kalyani did realize this importance and worked on it to transform the company and make it a world class leader in forging industry globally. He also realized the importance of the skilled labor and it was then he initiated to replace muscle power with brain power. Bharat Forge has transformed itself from a basic manufacturer for domestic consumption into a world leader to become the second largest forging manufacturer in world.
Suzlon’s inception was unintentional and was because of need for alternative source of energy, Mr. Tanti started a textile company in 1992, right from its inception it faced lot of problems such as uneven electricity supply, raising cost of electricity, though they tried to innovate they were still not able to control the electricity cost it was then. He realized the importance for the need of alternative source of energy to continue production which was not possible from the conventional supply of electricity. The alternative found was the wind energy but it required huge capital expenditure that exceeded his investment in textile business but he did not forgo the alternative idea he however took the risk and obtained two small capacity wind turbine. It was then Mr. Tanti recognized the importance of wind energy by his own experience as an owner of a textile industry and this lead to the inception of Suzlon and its foray into wind energy business.

The similarities and the key difference in strategies used by Bharat Forge and Suzlon as they transitioned from being an India-only firm to a genuinely globalized firm are contrasted below:
Mr. Kalyani knew that with the changing economy his company’s capabilities would become obsolete. Kalyani bet heavily that the future of Indian manufacturer would be driven by sophisticated production to meet the quality requirements of global equipment manufacturing. He knew that to be on top only meeting the domestic demand would not be enough. He also knew that to meet the international demand and to get the international client orders, it was necessary to modernize the manufacturing facility to meet the global standards and make efficient use of production capacity. It was this taught of modernization that helped Bharat Forge transform from a labor intrinsic company domestic company to an international renowned forging company.
The need for the alternative source of electricity led to the inception of suzlon. Mr. Tanti to find a permanent solution to offset the rising costs of electricity supply decided to invest in wind turbine energy. It is then Mr. Tanti forayed into the wind energy business though it required huge capital expenditure, he realized the cost effectiveness of it in the long run.
Mr. Kalyani realized the importance of Globalization. He understood the need to go global and expand Bharat Forge, but it involved a lot of challenges. The challenges he underwent at that time was low quality production and labor intrinsic inefficient manufacturing process. So Mr. Kalyani sophisticated the manufacturing facility and earned reputation for the Indian manufacturing sector by implementing modernization and innovation. By doing this the product design which previously took 6 to 8 months was done in 2 to 3 weeks. He also invited the key clients to visit and witness the manufacturing process and thus win their confidence.
Suzlon initial investment in two turbines for self-business gave Mr. Tanti a thought that wind power business would be successful and a unique business model. Suzlon energy limited was set up in 1995. Within 5 years Suzlon grew tremendously and had a domestic market share of 50%. Mr. Tanti knew that to be a leader and wind energy serving only the domestic market was not sufficient. He then drafted a strategy into 3 critical factors: Going global, Acquiring technology and use of Europe’s expertise with India’s low cost.
To expand Suzlon it was very important for them to have a global presence which it achieved by successful takeover and thus made its mark in the international market.
Suzlon heavily invested in R&D to improvise its technology and be self-productive to ensure both supply and quality to accelerate the delivery.
Suzlon always had goal to reduce cost of wind energy which was possible by combination of expertise from Europe and low cost manufacturing from India.
Another similarity with respect to Suzlon and Bharat Forge is that they give a lot of importance for their employees. This made them stand out as world leaders in their respected fields.
As Suzlon moved from a small scale industry to a large scale industry, they had to hire more employees. However the company’s vision could be achieved by treating all the employees as one team. This makes Suzlon the only company in the sector that manufactures their own key components.
Similarly Bharat Forge was a people integrated process. They believed in constant communication i.e. sharing information and being very open. They made sure employees actively participate in company’s activities to ensure there strong community involvement on behalf of the company, for instance Mr. Kalyani by a simple gesture of building a new clean locker room in place of old filthy locker room won over the employees and motivated the employees of Lansing that had previously faced bankruptcy and suddenly believed that there was a future.
Bharat Forge established its headquarters in Pune and managed its operations from India made India its main hub. Suzlon on the other hand established Denmark as its headquarters which was a hub for wind energy. Suzlon by establishing international business centers and through acquisition got access to world class technology which helped it to enter the European markets.
Bharat Forge used its “wow factor” i.e. it substantially reduced the time required for product development from 6-8 months to 2-3 weeks, this efficiency helped them win over more clients. Whereas Suzlon initiated with building their own clients that is through “concept of commissioning” i.e. as the production of wind energy required huge capital investment, Suzlon arranged finance for them, by this they became both the provider and custodian of wind power generation of its clients. This means that they identify the sites, conduct wind measurement study, budgeting, build the sub-station and grid connections. They also took the responsibility for operating maintenance for 20 years, this provided sustainable competitive advantage. In short they sold the machinery, arranged finance for it and also maintained it.
The below is the highlight about how both companies use their strategies to enter into global market and to achieve its goals and targets.
Both the companies used aggressive international take over policy which helped them to expand and get them clients. They realized that the modernization was the way for future and therefore invested on right time which contributed to their success.
Bharat Forge and Suzlon were committed to the goal of reducing cost and improve the quality of the product. The companies have very well followed de-risking strategy, in case of Bharat Forge that is dependent on revenue from automotive business has increased its revenue from non-automotive business to 40% to 17% and Suzlon which as mainly dependent on domestic revenue in 2008 earned an overall 70% of its revenue from international sales.

Bharat Forge undertook an aggressive international strategy of takeovers which helped them to take potential of those companies required for its expansion in that region. Kalyani also realized the importance of labor and thus paid special attention towards it, the transformation of muscle power to brain power has contributed a lot to the success of Bharat Forge.
Bharat Forge also enhanced the product range which provided an advantage to serve its customers in a better way which helped them win their customers globally.
Suzlon “Concept to Commissioning” was unique and helped them to win over the domestic market. They created their own customers by arranging finance, assisting in installation and providing service. It is also the wonderful business model because the concepts and designs comes from Netherlands, Engineering from Germany, the commercialization from Denmark and large scale application from India which won over the markets internationally and contributed to the Suzlon being the fifth largest company in the world.