Vestas Expansion Opportunity in India

KPCKEY POINT CONSULTANTS
Fuelling India with
Reliable and Sustainable
Wind Energy

Key Point Consultants is a not-for-profit team of
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KPCKEY POINT CONSULTANTS
Fuelling India with
Reliable and Sustainable
Wind Energy
Maud Chiche, Mattias Liu, Gabriel Montreuil-Moreau, Anna Ustsiuhava, and Jency Zhen
April 14, 2016

SNAPSHOT OF CONTENTS
4 FUELLING INDIA WITH SUSTAINABLE WIND ENERGY
DESCRIPTION OF COUNTRY AND PRODUCT SELECTED
GO-TO-MARKET: ENTRY STRATEGY
GO-TO-MARKET: PRODUCT STRATEGY
GO-TO-MARKET: PRICING STRATEGY
5
8
12
14
GO-TO-MARKET: DISTRIBUTION STRATEGY15
GO-TO-MARKET: PROMOTION STRATEGY16
BUDGET AND FINANCIALS18

5KEY POINT CONSULTANTS
IN THE WORLD OF INTERNATIONAL BUSINESS, the market of India is
a basket of fruits. With a national population of 1.2 billion, and more than
400 cities with populations over 100,000, India has become a bottomless
well of opportunities for businesses. The country’s outstanding economic
growth, with annual GDP growing at an average of 6% over the last decade,
has encouraged knowledge driven foreign companies such as Vestas to seize
the opportunity of increasing revenues by extending operations to India. As
a result of the economic boom and the rise of average income of the
population, the demand for energy has increased dramatically—after all,
there needs to be fuel for sustaining persistent growth. In response to the
ecological and economic issues arising from the sole reliance on fossil fuels
for the electriﬁcation of the country, both national and state governments
have set up policies in order to encourage renewable energy production
(annex 2). This is where Vestas can capture the opportunity and win.
A Broad Horizon for Vestas
The signiﬁcant increase of interest towards wind energy in India has
encouraged Vestas to contribute to the development of the wind energy
sector in India by establishing two manufacturing plants for nacelles and
blades, as well as an R&D center, in Chennai. Now that Vestas is
established in the India with a 20% market share, it has also developed a
strong network of clients that includes key players of India’s energy market,
we believe that Vestas should take its expansion a step further by opening a
new manufacturing facility particularly for towers on the other side of the
country, precisely in the state of Gujarat. Strategically located nearby is
Essar Steel, a key player of the steel industry in the state of Gujarat and a
potential supplier of steel plates for the production of wind towers. Essar
Steel has expertise producing standardized welded steel plates meant for
the fabrication of wind towers. On the macro level, the global business
environment of the state of Gujarat is attractive for investment mainly due
to its growth potential in the wind energy sector, its infrastructures, its
labor market, as well as the set of national and state government polices
supporting industrial development.

The Era for Growth
The decadal growth rate of the state of Gujarat is of 19.28%,
compared to the India-wide growth rate of 17,68% (2). Gujarat is
one of India’s leading manufacturing states. This sector alone
contributes 28% to the state’s GSDP. Overall, the moderately sized
state is actually one of India’s main industrial hubs and accounts
for 7.5% of India’s total GDP (2). In particular, the demand for
energy in Gujarat increases on average of 1% annually, and the
growth potential of the wind energy market in Gujarat is by far the
most promising of India (2). Although the total wind power
production in Gujarat currently stands at 3,500 MW, it has the
highest wind power estimated capacity of the country of 9,000 MW
(2). The Indian wind power industry currently sees an annual
market growth of 20%, but is pressured to increase its production
to 5,000 MW every year in order to attain the national
government’s objective of producing 60,000 MW by 2022. In the
state of Gujarat alone, the wind power industry has grown to
81.8% since 2012, foreseeing an annual addition of 2,000 to 2,500
MW of wind energy produced. Currently, less than 3,500 MW is
being produced right now, and since Gujarat has one of the highest
wind energy capacities in the country (See Annex 1), it follows
naturally that Gujarat is likely to be a hot spot for many wind
energy projects in the years to come. For Vestas, they do need to
acknowledge that with installation of wind farms completed on-
site, the transportation of wind turbines’ components represents a
major cost. By recognizing Gujarat’s potential for wind energy and
the promising outlook of its industry, locating Vestas
manufacturing facility of wind towers close to the expected projects
would eliminate the extensive costs related to transport. They can
also capture a bonus beneﬁt from agglomeration. This would
ultimately place Vestas in a more competitive position, as we
believe the expected cost savings will allow Vestas to oﬀer the most
competitive prices to India clients.
Understanding the Infrastructure
Gujarat is also a leading state in India in terms of infrastructure
sophistication. Transportation infrastructures are the backbone of
industrial growth, and Vestas relies on these infrastructures for the
supply of materials and subsequently for the distribution of its
products. In that regard, Gujarat has on its territory the highest
network density of roads and a widespread access to the national
rail network. The district of Surat also has the largest port of the
state as well as an international airport.

Taking Advantage of Labour
The state of Gujarat has a skilled and stable workforce. The city of Surat has
an 87% literacy rate, and the Work Participation Rate (WPR) in Gujarat is
of 41%, while the Indian average is of 39% (2). In 2014, 1.26 million
students were attending higher education schools across the state of
Gujarat. Among the 1,863 post-secondary and technical institutions of the
state, 71,286 seats were decided for engineering in 2014 (1).
A Competitive Landscape
Private manufacturers of wind turbines in India make up 95% of the wind
turbine market, in which Suzlon Energy Limited and Gamesa Renewable are
leading with 35% (2015) and 20% (2014) of market share respectively,
while, as mentioned before, Vestas holds 20%. In the wind turbine
manufacturing industry, Vestas competitors also include General Electric
India, Inox Wind, Para Enterprises, PASL Wind Solutions, Regen Powertech,
Southern Wind Farms, and Winwind Power Energy. Among these
competitors, only Gamesa, Inox, PASL and Suzlon operate manufacturing
facilities in the state of Gujarat. However, competitors established outside
of India also have direct access to the market of wind power turbines, since
the national government encourages the outsourcing of technology and
knowledge for the development of renewable energies in India. Accordingly,
the new India-E-U accord on the development of offshore wind technology
has supported the Danish company COWI in the implementation of their
technology for the set up of the first offshore wind farm in India.
Policies in Favour of Wind
National and state governments have set up a number of policies and
incentives to support and encourage the development of renewable
energies. In the manufacturing sector, national government policies in
support of the expansion of the wind energy sector exempts the parts and
raw materials of wind turbines manufactured in India of the Special
Additional Duty (4%). Other implemented incentives include income tax
holidays for power projects and 80% accelerated depreciation for heavy
investments. This is a significant advantage since Vestas’ productions rely
partially on importing parts from its global value chain, as well as
establishing wholly owned local plants. Furthermore, the state of Gujarat
has put forward an extensive plan of industrial development putting
forward the expansion of the green energy industry, which greatly
emphasizes the establishment of zero discharge plants (Annex 3).

Policies in Favour of Wind
Moreover, the state is uniquely duty-free due to the Special
Economic Zone (SEZ) Gujarat Act implemented in 2004. SEZ units
can be established for manufacturers in which they benefit from
greater flexibility in the appointment and termination of labor, as
well as a “Fixed Term Employment” policy to reduce labor-related
issues such as strikes that may impede production. This creates a
labor-intensive industry where companies like Suzlon, Vestas’
dominant competitor in the state of Gujarat, have their own SEZ
unit which provides them a pro-business environment and
advantage over competitors outside of Gujarat.
Go-to-Market: Entry Strategy
KCP Consultants recommend and reaffirm Vestas’ current entry
strategy: to open up a subsidiary in order to best benefit from
government incentives, while enjoying the discretion to take on the
contracts they need to grow. A key requisite for their entry strategy
is to be able to operate both within said market and potentially in
surrounding markets as well, uninhibited by its legal scope and
India’s red-tape laden regulatory framework. This is aligned with
Vestas’ strategic ambition of becoming the global leader in wind,
not only in terms of its technology but also its service and
operational excellence that comes together to strengthen the brand
indisputably within the industry (3).
This conclusion was arrived to after exploring other modes of entry
and assessing the limitations of each. Keeping in mind Vestas’
overarching guiding leadership mission is entering to capture
markets, instead of just for the sake of entrance, we can determine
that anything short of a foreign direct investment would be
insufficient for the desired extent of foreign presence. Vestas is no
stranger to new markets: the Danish manufacturer achieved its
global leading stance by providing installations in over 70
countries, as well as establishing research centres, parts
manufacturing plants, and sales & service offices worldwide (3).
This means that it has both the experience and the business model,
entailing of flexible solutions tailored towards customers, to
directly engage in FDI. In increasing degrees of investment, the
subsequent entry strategies are discussed.

For just a sales presence, Vestas can choose to open up a basic branch in
India or license their technology to the abundant selection of tech-savvy
local players. However, these strategies would be a mere dabble in a market
with such potential, both in terms of wind capacity and government support
issuance. As well, due to the high diversity of the country from state-to-
state, opening up sales centers along both the west and east coast is crucial
in order to immerse the Indian talent and to best cater towards local
customer needs. Similarly, considering that turbine production requires a
high initial investment and the necessary expertise, Vestas would be
hesitant to funnel out the technical knowledge of its core operations by
licensing to Indian manufacturers.
On the next level, and drawing on the success of MHI Vestas Offshore
Wind, a joint venture of Vestas offshore operations with Mitsubishi, Vestas
can choose to similarly share entry risk by establishing another joint
venture in India (4). Other benefits would include gaining relevant market
knowledge from the regional partner and establishing a guide to navigate
the regulative complexities with. However, beyond the risk of misaligned
interests inherent in most global-local player arrangements, further
weaknesses of partnerships that are particular to India are discussed in
Annex 5.
In a country such as India where the way of doing business is completely
different than what most foreign firms are used to, it is requisite to have a
physical and ongoing presence implementing a long-term strategy (5).
Thus, the best course of entry would be with a wholly owned subsidiary of
Vestas, set up within a special economic zone offered by the state of
Gujarat, in order to enjoy the flexibility for free trade provided to
manufacturer, as previously mentioned. The subsidiary can then have
centralized decision-making power for all operations and subsequent
expansions in the Indian market. As past instances of a multinational’s
success in India all required a high degree of investment and visible
commitment (6), having an independent subsidiary in India will not be
sufficient. We see greater expansion potential for Vestas to enter into
strategic alliances with key local suppliers, such as Gujarat Logistics and
Essar Steel for exclusive steel sourcing and logistics servicing contracts.
Such a move will differentiate Vestas and allow them to leverage its
partners’ competitiveness in the Indian market, as well as plant deeper
roots in India to benefit from in the future.

Furthermore, Vestas needs to clearly show Indian government
officials their intentions to stay long term in the country by
engaging the Indian labour force. Firstly, we recommend for Vestas
to take stock of possiblilities of enhancing their innovation by
partnering with Amity University, UPES, Amrit, National Institute
of Wind Energy, or IIT Chennai. These respective Gujarat and
national research centers and universities are dedicated towards
providing higher education, as well as contributing to pockets of
technology within India. In order to leverage local research and
development, while also attracting future talent, Vestas can give
grants of $10,000 per university, along with general research-based
awards. In reciprocation, the government, along with the vast pool
of skilled human capital in India, would be in support of Vestas as
they strive for on-the-ground market leadership. Equally, the
government may consider aiding renewable energy giants such as
Vestas solely based on the expectation for job growth, as the
sector’s job creation is predited to hit 24.4 million by 2030, if
renewable energy’s share in the energy field doubles (7).
From its current standpoint, Vestas India has settled in the market
and engaged in ongoing contracts with local Indian power
providers, such as Powerica Ltd, with whom Vestas provides a
contract extension for the supply and installation of 20 V110-2.0
MW turbines (8). The vastness of the project, consisting of a
cumulative 40 MW installed and maintained exclusively by Vestas
India, shows how Vestas steps up to the needs of local
manufacturing giants who’ve converted to clean power. Vestas is
ready to embark on the second step of their market entry plan and
expand their manufacturing activities, specifically in terms of their
towers production. Considering that Vestas identified their turbine
model V110 – 2.0 MW as the most suitable wind turbine for
India’s wind energy projects, and that Vestas already builds blades,
nacelles and the turbine model V82 – 1.65 MW in their Chennai
manufacturing center, we recommend Vestas to focus on the
production of tubular steel towers specifically for the V110 – 2.0
MW and V82 – 1.65 MW models of wind turbines (see Annex 6
and 7 for towers specs). Through our analysis of the competitive
overview of Vestas portrayed by the Ten C’s model (Annex 4), our
PESTLE analysis of the state of Gujarat, as well as an analysis of
the existing global value chain of the company, we’ve established
the city of Surat to be most suitable for the new towers
manufacturing facility to be established in.

Increasing Vestas production capacity of wind turbines in India will require
a plant cost of $55 million, and entail of 20 service department engineers
and 2000 employees, all hired locally. Additional costs to account for are
monthly salaries of 3000 USD and 2000 USD respectively, with an overhead
training cost of 500,000 USD, in order to fully prepare the local hires to
meet Vestas’ global standard. This will, in turn, signiﬁcantly reduce the
costs associated with transportation of the towers, as they are currently
imported from Europe for projects in Asia. Vestas does not seek to make an
acquisition for the towers plant, since they operate in industry of cutting
edge technology and would much rather own all the inputs of the turbine
production, in order to best ensure quality control along with control over
the entire process. The manufacturing expansion in India will follow the
model of their North American wind tower manufacturing plant in Pueblo,
Colorado, where Vestas sought to produce in-house the wind towers
dedicated for North American projects (9). The perceived long-term cost
cuts, from strategic partnerships, renewable energy government incentives,
and eﬃciencies realized from the new towers plant, would be passed on to
Indian consumers in the form of lower prices. In general, Indian consumers
are known to demand sophisticated products found in the West, but with a
mandated price cut. This aspect of competition in India means that
innovation is occurring not only through localized products and services,
but also in improving business models. To realize long-term success and
accommodate to consumer needs, Vestas must follow the general guideline
of aiming to cut costs by 60 to 80 percent, with just a 30 percent reduction
in features (5).

Go-to-Market: Product Strategy
Planning a wind power plant means considering a broad range of
factors over the entire lifecycle of the project: from initial financing
to sourcing materials to compliance with the regulatory
framework. Vestas‘ core business in the Indian market will be in
the development, manufacturing, sale, and maintenance of wind
power plants, covering all aspects of the wind project value chain
(Annex 8). In addition to this, our strategy consists of sourcing
clients for building successful projects and establishing long-lasting
partnerships with, during the planning phase. We believe that
through due diligence and close interactions with each client will
enable Vestas to provide everything from an inclusive package,
which includes supply, installation and a guaranteed performance
contract that is tied to the after sales service of the plant to build
loyalty with our clients (Appendix X). The guaranteed
performance contract is achievable under Vestas current model of
predictive digital servicing. Instead of reacting to a service failure,
Vestas advanced virtual monitors will predict an issue before it
even occurs on-site (Appendix Y). Then the service team can
perform the necessary adjustments virtually and order spare parts
if required. We perceive this as a major advantage over competitors
and it should be leveraged in the India market to differentiate
Vestas above competitors.
Basing on the Ansoff matrix, we believe that the most successful
growth strategy for Vestas operations in the Indian market is the
market penetration strategy (Annex 9). We also considered market
development strategy; however, since Vestas is already partially
present in the mentioned market and contributing into local wind
plant projects, this strategy is no longer relevant. Going into detail,
Vestas’ product strategy in the Indian market will consist of
optimizing wind turbine technology to deliver increased value and,
at the same time, reduce the cost of energy for its price-sensitive
customers. To strike a balance between its global brand and local
positioning, Vestas will have to find solutions suited to the Indian
market needs. This means that the key to success in the selected
market lies in customization. Therefore, Vestas will combine
reducing its costs and meeting capital expenditure requirements by
offering highly customized, technologically advanced products, in
hand with the unique sales strategy KPC has developed that will be
discussed later on.

Go-to-Market: Product Strategy
Through tailored products, Vestas aims to develop close customer
relationships by gaining a clearer understanding of the specific requirements
and optimizing projects for each. Combining all of the aforementioned factors
with Vestas support throughout the entire value chain of a wind power plant,
the company will realize its core strength in the Indian market to achieve its
long-term vision of having the strongest brand in the industry. Post-entry,
Vestas can strengthen its brand to Indian consumers by bringing forth value-
added features that are not compromised by the market’s desire for lower
priced turbines. In order to leverage its latest acquisition of Germany-based
service provider Availon, Vestas should focus on transferring the service
maintenance best practice to aid major turbine projects active in the Indian
market, especially on west coast of Gujarat (10). Since Vestas currently has a
90% rate of service contracts, KPC strongly believes that Vestas can lock in a
steady cash flow from services and it broadens the portfolio of offerings to
local customers (Appendix V). To ensure smooth running of every customer‘s
business, Vestas will offer Indian clients a complete package of maintenance
services in order to identify, allocate, and properly manage risks, and ensure
peak performance from each wind plant on the selected territory. Depending
on turbine characteristics, customer preferences, and site conditions, the
company will provide tailored solutions in order to extend the life of wind
plants. As it was mentioned above, in order to achieve widespread acceptance
in the Indian market of wind turbines, Vestas’ products and services must be
tailored to the needs of the country. In terms of adaptation, Vestas will have to
accustom to particular issues and be flexible in its specifications. Firstly, based
on India’s resources and existent demand, it is crucial to modify the size and
package of the offered products. Instead of bringing forth Vestas entire product
range, we chose the V110-2.0 MW and V82 – 1.65 MW turbines to
manufacture, as they are most suited for the low-wind sites in the country.
Secondly, to ensure customer loyalty and continued market expansion, Vestas
will have to adapt its business strategy to account for the disparity between
Indian and European culture, behavior and way of doing business. The
company must show a strong commitment to the country, empower their local
operations, and invest in local talent. Based on what was mentioned above, it
is strategically important to pay closer attention to the needs of the Indian
consumers by offering the degree of customization the local market requires.
Going further, Vestas products are associated with notable symbolic and
technical differentiation (Annex 10). Firstly, due to its innovative technology,
Vestas aims to become a key driver in the Indian market with its wind
turbines. Operating on a capability basis alone is not enough as secondly,
Indian customers put emphasis on quality and efficiency. Therefore, Vestas
needs to assume technical differentiation in order to distinguish itself from the
intense competition already established in the selected market. And finally, the
brand is enjoys worldwide recognition and status in the wind turbine market.
Therefore, Vestas will position its products in the Indian market using the
same coordinated image.

Go-to-Market: Pricing Strategy
Vestas’ core operations in wind technology consist of getting high
profit margin, establishing, and then maintaining a premium
pricing strategy (Annex 11). Even building the wind power plant is
a very capital-intensive investment; therefore, taking advantage of
exclusive supplier agreements and government aid is crucial to
maintain its premium pricing strategy.
It should be mentioned that the total cost for installing a
commercial- scale wind turbine could be significantly affected by
numerous factors (Annex 12). The wind turbine is supposed to be
the largest single cost component of the total installed cost of a
wind farm. Then, the final price of the project will vary depending
on such factors as: the number of ordered wind turbines, cost of
financing, the date when the turbine purchase agreement was
executed, construction contracts, the location of the project, etc. In
addition to wind turbines, the cost components for wind projects
also include the following: wind resource assessment and site
analysis expenses; construction expenses; permitting and
interconnection studies; utility system upgrades, transformers,
protection and metering equipment; insurance; operations,
warranty, maintenance, and repair; legal and consultation fees.
Taxes and incentives are other factors that have a significantly
mitigating impact on the total cost of the wind power plant project,
as government granted generation-based incentives awards 0.01
USD/ kW (11).
Basing on the industry analysis, the average price for wind turbines
varies from $900 to $2,350 per kilowatt of capacity (Annex 13). In
general, wind turbine orders give Vestas revenue of around $1.1
million per megawatt on average (12)
As it was already pointed out, we are entering the Indian market
with two models: V82 – 1.65 MW. And V110 – 2.0 MW. In order
to bring our customers outstanding performance at a cost effective
price, our idea consists in sourcing a part of components for V82 –
1.65 MW model locally, through Indian suppliers. Therefore, we
assume that this wind turbine model would be priced at
approximately $2,310,000 (e.g. $1,400 per kW). The second
model, V110 – 2.0 MW, is an advanced version of V82 – 1.65 MW.
It is characterized as an extremely reliable turbine, which provides
high availability and performance. We plan to import materials for
this model from Denmark and then assemble it in the district of
Surat. Due to higher costs of logistic and components, we suppose
that an estimated price for V110 – 2.0 MW model would be
$3,600,000 (e.g. $1,800 per kW).

Go-to-Market: Distribution Strategy
In conjunction with the preexistent centre in Chennai, we propose that
Vestas think global, but hire local by opening a new sales office in Mumbai
to facilitate their go-to-market strategy of using personal exposure and
direct selling to clients on the west coast of India. Additionally, Vestas can
build a strategic alliance by working with Gujarat Logistics to deliver their
turbines to the client site in the most efficient and reliable manner, as well
as help Vestas achieve efficient supply chain operations (ANNEX 14). Most
high profile clients will susceptibly conduct business in a major city (13).
Therefore, this office is conveniently located to reach and service the west
coast target market. It also minimizes channel length and obeys the vertical
integration model of Vestas. It also allows the sales team to work closely
with the new factory in Surat to respond quickly to changing client
demands.
Investment in human capital is of the utmost importance in high
involvement deals (15). Therefore, training programs, incentive-based
compensation, and rotation opportunities are conducive to the success of
the Vestas Mumbai sales centre. The Vestas Mumbai sales team will act as
an official sales and service centre, which will consist of four salespersons
and one executive. By hiring local, multinationals can navigate local
intricacies and cater to local preferences. More importantly, upper
management from Vestas in Denmark can empower the Mumbai sales team
to succeed with the right recruitment and training. For the sales team, KPC
proposes that Vestas hires four full-time employees with two to three years
of experience in a background in engineering or management and graduated
from IIM or IIT. It is imperative that Vestas leverage prestigious talent
because Indian businesses do recognize the caliber of expertise that those
two institutions have produced (16). As for the Mumbai office executive,
Vestas ought to find someone who has a mix background of doing business
in India and Europe. Preferably, someone who graduated from a western
institution, but has relative work experience of over five years in India
working for a multinational company. It is important to train the sales team
properly in Denmark first so they have hands-on experience with supply
chain and operations before selling to Indian clients. Then entrust them to
effectively manage their territories, with flexibility and decision authority to
execute strategies that will appeal to local clientele. The compensation of
the sales team should also offer commission-based incentives to reward
consistent effort. On a medium to long term basis, these sales managers
ought to be rotated to other sales centres across the world so they have
more experience and knowledge working in different environments.

Go-to-Market: Promotion Strategy
India is an emerging market that is characterized by its diversity.
The different catchments and zones are inhabited by citizens with a
vast range of incomes, lifestyles, age, and sociocultural norms. In
addition, there are 22 languages, six ethnic groups, and seven
major religions in the vast population (14). Therefore, a replication
of the global promotional strategy will not be effective here. That
being said, KPC proposes that Vestas think small in order to
embrace diversity and leverage local nuances to its advantage.
Vestas can achieve B-2-B promotional success by demonstrating
commitment from upper level management, empowering the sales
team with authoritative powers, and hiring an in-house Indian IT
team. The IT team’s main responsibility is to create brochures that
will be displayed in the sales centres and manage the online
platforms, which remains in line with the vertically integrated
business operations of Vestas. A three-part push-pull direct selling
strategy should be deployed as wind turbines are a high
involvement purchase that will require several on-site visits to a
mixture of key influencers.
1. Push
There needs to be a push from the C-suite level including Mr.
Runevad, who is the chief executive of the company to engage with
key stakeholders, influencers, and top clients three to four times a
year. Engagement from the senior executives show respect and
commitment from Vestas to Indian clients.
2. Pull
Sales teams need to be given autonomy to customize offerings and
service packages that cater to local clients, which pulls clients in.
On this front, Vestas needs to establish firm guidelines on how
much they are willing to discount by and cut back functions
without hurting profit and product quality. The sales team is
responsible for attending four renewable energy trade shows
spread throughout the year, which are very effective in drawing in
attention especially from a reputable western firm with a proven
track record (Annex 15). The trade show booth ought to be
appealing for visitors to come engage with us (Annex 17). The
sales team must work with the IT team on the digital side. They
can optimize their digital footprint so it enables all interested
parties to directly contact a sales team member, which will be
managed through Sales Force and eventually generate a hot lead.
Subsequently, the team will use customer relationship
management to manage their leads and follow-up on a consistent
basis.

3. Push
Hire an in-house IT team to optimize Vestas India’s digital footprint.
Recruit one content editor, two computer engineers, and one translator to
customize the website so it fits with local digital media. The content editor
will be responsible for creating brochures for the sales team and videos for
the website with assistance from the media division at Vestas headquarters
to showcase the cutting edge technology on the right media platforms
including mobile, which pushes product benefits onto potential clients that
generate leads. This individual will also be responsible for managing social
media. The two computer engineers are responsible for the migration of the
website domain to the Indian website domain. They ought to use search
engine optimization and metadata in order for Vestas to be mentioned first
in all pertinent web searches (Annex 16). All web content must be
translated to the main languages of the clients for them to easily access
product information on demand in their own preferred dialect.
Since customer relationships are most important in large deals like this, it is
important to consider the customer lifetime value. By implementing the
push-pull strategy, Vestas will not only engage customers, but retain them.

Feasibility: Current Situation
Vestas possesses extensive reserves of cash and cash equivalent
(c.f. Balance Sheet in Appendix A). In 2015, it had reserves
amounting EUR 2,765 million in cash (equivalent to USD 3143.39
million). The loss for the first three years of the expansion project’s
life, before break-even, are respectively USD 92 million, 27 million
and 16 million (more detail in “budget and financial projections”).
Consequently, these initial losses are very manageable for the
company considering the cash reserves they keep. As a result, the
company will not need to contract new debt to finance the
expansion project in India.
The budget and financial projections that follow are done on a
project basis: They will thus follow the assumption that the project
is fully equity financed (e.g. there will be no debt and consequently
no interest expense).
Budget and Financial Projections
The first year of expansion requires extensive fixed costs, with in
particular the presence of one-time costs such as the construction
of the new manufactory (for USD 55 millions) of the sales office,
the training of employees (engineers and sales person flying to
Denmark for their training), and the promotional elite trade shows.
It is thus no surprise that we obtain a very negative net income of
USD -92,348,250 for the first year (Appendices C and E). After
year 1, the fixed cost remaining are mainly salaries, utilities, and
further training for the employees.
We made the assumption that the sales of turbines would increase
steadily over time (Appendix D), with weak sales in the first year
as a consequence of the need to establish their presence, and the
manufactory entering full capacity during year 8. The estimates
were taken by analyzing the current production of Vestas in India
(Appendix B) and comparing it to the new opportunities offered by
the expansion. As a result, revenues will increase steadily over
time, from the sale of 30 turbines during the first year to the full
potential of 140 during year 8. We also assumed that Vestas would
sell an equal quantity of both models.
The financial projection of the projects’ net income forecast the
breakeven point to occur between year 4 and year 5 (Appendix E).
Starting year 5 the project will have a positive net income. Overall,
5 years to breakeven seems reasonable for a project of this scale.
Please refer to appendices B to E for more information regarding
the budget and financial projections for the project.

Managing Foreign Exchange Risk
Vestas leads operations all over the world and has to manage its foreign
exchange risks not to suffer from the currency markets’ volatility resulting
in fluctuations in the income statement. For this reason, the company is
already engaging in different hedging strategies, as described in Appendix F.
In particular, Vestas uses currency forward contracts to lock in exchange
rates for the future and thus avoid any good or bad surprises. The company
would pursue a similar strategy to hedge against the fluctuation of the
Indian rupee against the euro. Additionally, because the goal is for Vestas to
become as vertically integrated as possible in India, the company will
possess a natural hedge against currency fluctuations. In effect, it will incur
both costs and revenues in Indian rupee, which will partially offset foreign
exchange risk.
Future Outlook
As we can see with the financial projections, the manufactory will reach at
some point full capacity (we estimated this to happen during year 8,
approximately three years after the breakeven point). Consequently, should
the phase of expansion be successful, a next logical step for Vestas would be
to increase the scale of its operations. In particular, Vestas could open new
sales offices in big Indian cities such as Calcutta, Delhi, and Chennai, in
order to gain in visibility and target a larger audience. Additionally, the new
manufactory could be enlarged to allow the construction of other models of
turbine, for Vestas to grow in India by increasing its product offering. A
marketing analysis will have to be done at this point to analyze the specific
demands of the market and decide which turbine models to add to the
existing product offering. Lastly, in a worst case scenario, should the
unlikely event that a wind turbine piece breaks off, Vestas should consider
opening a spare parts and repair facility in order to service the on-shore and
off-shore service projects directly.

Long Term Think Off-Shore
In the longer term (6 to 10 years depending on the evolution of the
market), the next step for the expansion plan could be to add the
productions of winds turbines dedicated for offshore projects.
Currently, the Danish firm COWI is developing the first offshore
project along the coast of Gujarat, with the support of the EU and
the government of India. They recently made an agreement of
expertise trade to stimulate the development of offshore wind
energy projects in India. The national government of India also
implemented a new policy encouraging the implementation of
offshore projects, by offering particular cost advantages. In
particular, Gujarat possesses an outstanding capacity with 1700km
coast line representing an estimated capacity of 106,000 MW, it
could thus be very convenient for Vestas to expand its operations
and enter the Indian off-shore business segment. Vestas has
decided not engaging in off-shore in the short term because of the
higher risk involved (compared with inshore). In effect, offshore
required important capital commitment because of high
operational and maintenance costs it implies (Appendix G). In the
longer term, the established presence of Vestas in the Indian
market will help reduce the risks associated with high commitment
projects. As a result, the foreseeable growth of offshore projects
along the coast of Gujarat may generate more opportunities for
Vestas’ joint venture with Mitsubishi, MHI-Vestas Offshore; this
sub-division of Vestas is an industry leader in the conception of
wind turbines dedicated to offshore ventures.
WITH THE EXTENSIVE EXAMINATION, KPC proposes that
Vestas expands operations into India in order to establish its
stronghold in a crucial spurring market.

ANNEX 2: Sustainable Energy in Gujarat
ANNEX 3: Gujarat Industrial Development Plan

ANNEX 4: 10 Cs of Competitiveness
TEN C’s OF GLOBAL COMPETITIVENESS - Vestas’ Outlook.
1. Competitive Products and Services
“Price, quality, commercial and delivery terms, customer service support – the list goes on – are all
component parts of a buying decision. Whether a company is selling goods or services domestically, or
to clients abroad, they must have a clearly defined value proposition that meets or exceeds their
customer’s requirements.”
-       Vestas is competitive on the global market since its products and services are being produced
from a global value chain, which reduces costs of production.
-       Vestas offers a wide range of products adapted to the particularities of energy industries in
different markets. For instance, developing markets are more likely to settle less efficient products and
services at a significantly lower price, whereas clients in developed country require the development of
cutting edge technology in order to increase the performance of their wind farms.
2. Critical Mass
“Canada is a nation of small and medium-sized enterprises. Of the approximately 1.1-million employee
businesses in this country, over 99 per cent are small and medium-sized enterprises (SMEs; defined by
Industry Canada as companies having less than 500 employees). To compete effectively over the long
term means having sufficient human and financial resources, and operational capacity to do so”.
-       Vestas has 22,721 employees in over 30 countries around the world (2011)
-       Vestas has introduced a set of HR policies prevailing for the diversity, safety and the rights of
its employees.
-       Vestas supplied wind turbines in 75 countries, guaranteeing a sustainable source of revenues
in a wide range of markets and a national edging advantage over foreign currency payments.
-       Vestas had 12% of the world market, 50% of their revenues coming from the European
market
-       Vestas had revenues of 5,836 M in 2011
3. Commitment
“In this case, commitment refers to the demonstrated commitment by management and employees in
planning for and implementing commercial activities. If the director of business development in
Company X, for example, is spending more time selling the benefits of Market Y to his/her superiors
versus selling the company’s products or services to prospective clients in the Market Y, the chances of
Company X succeeding in Market Y are limited.”
-       Vestas is committed to provide a sustainable work environment
-       Vestas is committed to fight against corruption
-       Vestas is committed to protect human rights and freedom of association in its work
environment
-       Vestas is committed to raise attention of ethics in its work environment
-       Vestas is committed to sustain a profitable growth
-       Vestas is committed to capture the full potential of the service market
-       Vestas is committed to remain the market leader by volume
-       Vestas is committed to become the best in class margin
-       Vestas is committed to become the strongest brand of the industry
-       Vestas is committed to bring wind energy on par with gas and coal energy

4. Capital
“The availability of, and access to, capital is a critical element in building a healthy and viable
enterprise. Not surprising, one of the main areas that is always cited by SMEs as being a particular
challenge in their operating environment is access to financing. This challenge will impede business
growth – domestically and internationally.”
-    Vestas has DKK 224,074,513 in shared capital
5. Connected
“Connected in this case has two component parts:
a) Business connections/networks
b) IT readiness or “connectedness”
Building a globally competitive enterprise requires both.”
A)   Vestas operated a global chain network for the production of its components. Vestas also
cultivates strategic alliances with local suppliers and in the several countries in manufactures
component, and with heavy transport companies around the globe. This connectedness gives Vestas a
competitive advantage, trading its exclusivity with these supplier and logistics partners with pricing
advantages.
B)   Vestas is a leader in the development of means of production renewable sources of energy. The
cutting edge engineering technology of Vestas, which places them as market leader, also extend to IT
technology. Vestas also supports and online R&D brainstorming platform in collaboration with HYPE
Innovation Inc.
6. Country Acumen
“As an exporter, importer or direct investor, it is important to have more than a superficial
understanding of the country that your company is doing business with or in. Successful management
of business risks and the ability to effectively penetrate a particular market requires in-depth
knowledge and appreciation of the country’s history, culture, political and economic structure and
direction, industrial profile etc.”
-       Vestas has a strong expertise at undertaking business internationally.
-       Vestas already has a manufacturing and R&D center in Chennai, India. Hence Vestas already
has a global knowledge of the Indian market regarding its particular culture, political and economic
structures and regional competition.
-       Vestas undertakes projects in different states of India, therefore it indirectly develops an
expertise at conducting business in different regions of the country (i.e. Vestas’ 40 MW project to be
set up in Gujarat).
7. Company Plan
“Building a globally competitive enterprise does not happen by chance. The plan is the foundation
upon which the company will successfully grow. It will also vary, depending on what the specific
commercial objectives and goals are of a particular enterprise.
For each new market that a company is planning to enter, in Canada or abroad, a market- specific plan
should be developed.”
-       Vestas’ general plan focuses on a set of sustainability objective, which includes the objective of
sustaining profitable growth, as well as operating human resources and innovation on a sustainable
perspective.
-       Vestas has a specific plan in terms of global competitiveness for each market its operates in
(Denmark vs. China)
-       In India, Vestas’ plan is to offer products and services slightly less efficient for a significantly
lower price.

8. Continuous Innovation
“Innovation is a key driver in creating productivity. In the case of the 10 C’s of Global Competitiveness,
this translates in to sustained and profitable sales. In the global economy, the speed at which business
takes place is accelerating, so Canadian companies must keep the wheels of innovation rolling if they
hope to remain competitive.”
-       Vestas recognizes innovation as the fuel keeping the company moving forward.
-       Vestas is committed to set the pace of innovation in the industry for the benefit of its clients
and the planet
-       The expansion and customization of the 2MW and 3MW platforms allows Vestas to be highly
competitive, offering on the market top quality products that are easily customized for the needs of the
client.
9. Competence
“Competitive advantage in the global economy is driven by knowledge, but knowledge that goes well
beyond the acquisition of information to include tacit knowledge or know-how. In this case, the issue
of competence starts at the managerial level and flows downward. If a company’s leadership does not
have the necessary skills and acumen to compete at a world-class level, the company will not be
positioned to realize sustainable and profitable sales.”
• Vestas has 110 years of expertise in the energy industry.
• Each member of Vestas’ executive team has previous work experience in the energy sector and
economics, which is relevant in the wind power industry as it is a constant challenge for Vestas to
sustain profitable operations.
• Vestas’ Board of Directors has managed to put the company on the path of profitable growth
10. Confidence
“In building a globally competitive enterprise, the management and employees of the company must
have an unwavering belief in the company’s ability to compete at a world class level. This belief is not
based on blind faith. It is confidence that is created as a result of the 9 other C’s coming together.
While a particular enterprise may have limited to no experience in competing internationally, it can
create the winning conditions for commercial success.”
• Vestas considers itself has the world’s leader in wind power technology.
• Vestas has the financial confidence to continuously reinvest its profits on the development of
new technologies.
• Vestas has a broad knowledge of several markets around the world.
Vestas has proven the efficiency of its model of manufacturing expansions in different countries (Brazil,
USA, China).

ANNEX 5: Join Ventures in India
Sources :
Doing Business in India - Success, Failure and the Prospects for Canada November 2010
How multinationals can win in India March 2012
It’s difficult to do business by holding onto the same expectations for Indian partners as Vestas’ past.
There are different ethics within the Indian culture and foreign firms are encouraged to rely on joint
ventures to guide them away from corruption. However, it is more important to know your partners,
and from the following quotes sourced from the above mentioned articles, we believe the risks of
partnering in India outlive the short term rewards.
• “We quickly realized that if you are going to have a long-term strategy in India, you need to
demonstrate to the Indian corporates that you are not just a suitcase banker. It is important to have a
physical presence in India with people on the ground.” - Ashi Mathur
• “People would have questioned whether you are going to get anywhere. Countries like India
are definite long-term stories. We need to make sure we move in the right direction, avoid pitfalls in
terms of loans losses, and stay on the right side of the regulator, which we do.” - BMO
• “Government officials can be hard to meet and not transparent about plans, establishing
partnerships with reliable Indian firms is difficult, competition is intense, getting paid can be a
problem, projects are often delayed or changed and the laws and bureaucracy can be ‘intricate and
cumbersome.’” –Hugh O’Donnell, CEO
• Multinationals that enter the country on a stand-alone basis, our experience shows, generally
fare better than those that use Indian partners to create joint ventures. Most global companies that
opted for them have exited the Indian market, while some have purchased the stakes of their partners
or established majority shareholdings
In practice, joint ventures often tend to emphasize short-term performance over long-term goals, long-
term commitment, and an alignment between the interests of the global and local partner.
ANNEX 6: V85 Specifications

ANNEX 7: V110 Speciﬁcation
ANNEX 8: Vestas Value Chain

ANNEX 10: Differentiation of Vestas Products

ANNEX 11: Pricing Matrix
ANNEX 12: Capital Cost Breakdown

ANNEX 13: Average Wind Turbine Prices

ANNEX 16: Metadata
ANNEX 17: Sample Trade Show Booth

APPENDIX C: Vestas’ Fixed Costs

APPENDIX F: Foreign Currency Risks
APPENDIX G: Offshore vs. Onshore

APPENDIX X: Guaranteed Contracts

APPENDIX V: Service Renewal Rate

REFERENCES
(1) Directorate of Economics and Statistics, Government of Gujarat. (2016) “Socio-economic Review
2014-2015”.
(2) Industries Commissionerate, Government of Gujarat. “Gujarat Industrial Policy 2015”
(3) Making wind work. (n.d.). Retrieved April 13, 2016, from https://www.vestas.com/en/about/
profile#!business-model
(4) Vestas Gains on Mitsubishi Heavy Deal for Offshore Wind. (n.d.). Retrieved April 13, 2016, from
http://www.bloomberg.com/news/articles/2013-09-27/mitsubishi-heavy-vestas-to-join-forces-on-
offshore-wind-energy
(5) Doing business in India : Success, failure and the prospects for Canada. (n.d.). Retrieved April 13,
2016, from http://www.worldcat.org/title/doing-business-in-india-success-failure-and-the-prospects-
for-canada/oclc/716053131
(6) V. C. (2012, March). How multinationals can win in India. Retrieved April 10, 2016, from http://
www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/how-
multinationals-can-win-in-india).
(7) REmap: Roadmap for a Renewable Energy Future, 2016 Edition. (n.d.). Retrieved April 12, 2016,
from http://www.sustainablebrands.com/digital_learning/research_report/cleantech/
remap_roadmap_renewable_energy_future_2016_edition
(8) News Release from Vestas Asia Pacific, Vestas Media. “Vestas to Supply Wind Project in India”
(9) The Largest Tower Factory in the world - Vestas. (n.d.). Retrieved April 12, 2016, from https://
www.vestas.com/~/media/vestas/investor/investor pdf/calendars/
100902_vestascmd_01_kbh_towers_thelargesttowerfactoryintheword.ashx
(10)Availon announces strong growth in Vestas turbines O&M servicing. (n.d.). Retrieved April 10,
2016, from http://www.availon.eu/en/news/press_releases/availon-announces-strong-growth-in-
vestas-turbines-o-m-servicing
(11) http://www.gwec.net/wp-content/uploads/2012/11/India-Wind-Energy-Outlook-2012.pdf
(12)How much do wind turbines cost? (n.d.). Retrieved April 10, 2016, from http://
www.windustry.org/how_much_do_wind_turbines_cost
(13) Smallbusiness.wa.gov.au. (n.d.). Retrieved April 13, 2016, from https://
www.smallbusiness.wa.gov.au/business-in-wa/corporate-publications/business-guides/marketing-
place-distribution-strategy/#what
(14) City Census 2011. (n.d.). Retrieved April 13, 2016, from http://www.census2011.co.in/city.php
(15) Strategies for effective industrial business marketing. (n.d.). Retrieved April 14, 2016, from
https://www.b2bmarketing.net/resources/blog/strategies-effective-industrial-business-marketing
(16) IIT Kanpur the best engineering college in India. (2015). Retrieved April 14, 2016, from http://
www.aapkatimes.com/iit-kanpur-the-best-engineering-college-in-india

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