IBS BUSINESS SCHOOL

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. 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. 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. 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. 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. 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%

7. THANKING YOU
FOR YOUR PATIENCE…