Bhel case presentation


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Bhel case presentation

  1. 1. Case Presentation: Business Strategies BHEL:Losing Out to Chinese Rivals ? Presented by: Utkarsh (13BSP1230) Pooja (13BSP0537) Karan Rathi(13BSP) Mallika Sharma(13BSP1511) Akanksha(13BSP1797)
  2. 2. INTRODUCTION  BHEL was established in 1964,deals in manufacturing power plants equipment in India.  During in 2011, BHEL is known as the dominant player and was ranked as the ninth most innovative company in the world by US business magazine, FORBES.  BHEL manufactured over 180 products that catered to the core sectors of the Indian economy such as power, transmission, industry, transportation, oil & gas, non-conventional energy sources, telecommunication & defense.  BHEL established its first 60MW boiler for the ENNORE THERMAL POWER PLANT near CHENNAI.  They were also focusing on export order too in the early 1970’s in Malaysia with successful distribution channels.  NOT only Successful delivery they also created a repetitive delivery in several countries to whom they delivered earlier due to their strong bonding with customer’s . Bharat Heavy Electricals Limited
  3. 3. What turns BHEL for having a joint venture ?  Capacity constraints  New Entrants (Adani Power Ltd. Tata Power Ltd, Reliance Power Ltd, Lanco Infratech Ltd, GMR Energy Ltd and GVK Group placed orders with foreign companies)-DOMESTIC COMPETITORS  Open Economy-Many new foreign countries (Chinese,Korean,Russian) are coming with advanced and updated technologies with more MW capacity.  The first UMPP at Mundra, Gujarat, was constructed by Tata Power, with equipment imported from Japan.  Having capacity constraints for the manufacture of power equipment, BHEL’s capacity of 6000 MW was increased to 10,000 MW in December 2007 To survive the competition, BHEL entered into a joint venture with NTPC Ltd. to execute engineering, procurement, and construction of power projects on a 50:50 partnership. UMPP: ultra mega power projects
  4. 4. BHEL VS CHINESE PLAYERS  BHEL was the high cost supplier of power equipment whereas Chinese players products were low priced and were delivered on time.  BHEL equipment for unit of power producer needs to spend Rs 2 as fixed cost whereas in Chinese equipment reduced its fixed cost to Rs 1.4 or 1.5.  Chinese was experienced in producing BTG (Boiler turbine generator) whereas BHEL was just about mastering the technology.  BHEL commissioned a 600 MW unit delivery in 36 months whereas Chinese commissioned in 30 months.  Chinese companies had standard power point design and they use to assemble parts using nuts n bolts whereas BHEL used welding for projects which was time consuming.  BHEL Has an edge over competitors as Chinese companies did not offer tailor made designs which provides units that could be adapted to local conditions.  Interest rates charged by Indian banks was 10 to 13% while Chinese bank charged just 4 to 6% making a significant difference in cost of project.
  5. 5. INCREASING THREAT FROM CHINESE RIVALS  BHEL, the 12th largest power equipment manufacturer in the world faced stiffed competition from Chinese power equipment players.  Analysts pointed out a lot of weaknesses in BHEL like the capacity constraints, delayed delivery performance, cost factors, etc.  BHEL started losing to Chinese rivals from the year 2000.  The Chinese players, who had little or no existence a few decades ago, took away 50% market share from BHEL.  Indian power companies struggled to get finance for their projects and it helped Chinese companies to gain a strong foothold in India.
  6. 6. Taking on Competition Strategy to counter competition. New subsidiary to function as the financing arm for power projects. Improve order book. BHEL formed joint venture with state utilities like Madhya Pradesh, Tamil Nadu and Karnataka. Decided to go multi modal to bring down logistics costs. Launch a new range of products equipment sets of 600mv. 500mv equipment upgraded to 525 mv and 250mv-270mv. 10 year wage agreement with unions. BHEL needs to internalize R&D and reduce dependency for critical technologies. Needs to reassure the private section that they can deliver on time and at competitive prices. Increase vendor base in China. Sourcing from china along with other cost cutting measure enabled BHEL to reduce material cost at around 60%