SUZLON CASE ANALYSIS

Q1) How do you analyse the attractiveness of industry? Should Suzlon Energy expect more competitors in the days to come? How should it prepare itself for it? The energy sector can be broken down into two parts: the renewable energy sector and the non renewable energy sector. The non renewable energy sector comprises the energy that we get from traditional sources i.e. coal and other fossil fuels. Non renewable sources of energy or also referred to as clean energy comprises of energy derived from non exhausting sources of energy like the solar energy. Wind energy comes under the latter part. In recent times, a lot of scientists have raised concerns for the need of alternative sources of energy. Wind energy thus has attracted a lot of research in recent times. The attractiveness of the industry can be understood through a SWOT analysis. STRENGTHS 1) It is a sought after field currently with many international players also looking into the option of producing wind energy. 2) Provides clean and unlimited source of energy- thus it doesnt require recurring costs and will find a lot of consumers. 3) Requires very little land area as compared to traditional turbines WEAKNESS 1) The setup cost for wind energy farm is very high. Therefore huge initial investment is required 2) Wind energy farms can be setup at specific geographical locations where more wind is there and can be easily tapped 3) The efficiency level for a wind energy farm is more OPPORTUNITIES 1) Huge industry growth is estimated by GWEC 2) Huge investment is being made in the Research and Development of this sector which will benefit all the players in this industry 3) There is pressure on countries to reduce carbon footprint and adopt more sustainable sources of energy THREATS 1) Recent developments in discovering new ways of extracting shale can reduce demand for renewable sources and again shift demand to the non renewable energy side 2) Seasonality can affect the efficiency of a wind energy farm 3) There are relatively less number of skilled manpower who can build state of the art wind farms We can also examine the industry through the following table which discusses Porters five forces:

Porters Five Forces Power of Suppliers Entry Barriers Industry Rivalry Power of Buyers Threat of Substitute

Extent in Industry Low High Very High High Low

Global Rivalry in this field is high as big players like Vestas, GE Wind, Gamesa etc, companies with better brand value and better access to technology exist in the market. Suzlon produces wind energy at a low cost, therefore entry barriers to other firms is high. Also since wind energy itself is a substitute for other forms of energy, and thus there are limited threat of substitutes for this product unless we count other forms of renewable energy. Since Suzlon produces its own raw materials, bargaining power of suppliers is less. However Bargaining power of buyers is high as there are many companies with better technology. As mentioned in the SWOT analysis, this industry is a highly lucrative industry currently with high growth prospects. There is pressure on every firm and country to reduce carbon footprint. In light of this information we can assume that there will many companies who will research this industry and come up with new technologies to gain market share. Thus Suzlon should prepare accordingly as the future will definitely see increasing completion. Suzlon has a distinct advantage as it is one of the early movers in this field. It has already tested designs and has an idea of the efficiency expected from the wind farm. Moreover it has gained early access to the lands in which it plans to construct wind farms. Suzlon should further safeguard itself against future competition by leveraging its first mover advantage. It should continuously look to innovate and develop cheaper and more efficient technologies so that it remains ahead in the race to capture the wind energy market Q2) Please evaluate the decision of Tanti? Has it given it any competitive advantage? When the first acquisition Suzlon took place there were various supply bottlenecks which led to several problems for the company. After this Suzlon acquired Hansen Transmissions and gained access to better gearbox technology that it could integrate with its turbine solution to form a better product. Also the experience that Hansen Transmissions brought in terms of its management prowess also enabled Suzlon to expand to Belgium. Thereafter the acquisition of REpower helped Suzlon gain a foothold in Europe which constitutes nearly half of the Wind energy market. Thus we can see that acquisitions made by Suzlon have materialized and have led to technological and competitive advantage for the company. Not only has it moved to European markets but has also gained access to superior technology which has made Suzlon products better and at par with other players. This has also made Suzlon a vertically integrated company as it now can use technology by a firm to any use in its operations. It now has a bulk of opportunities to further leverage the manpower and lab resources that it

has gained to improve the quality of its offering. The acquisitions have made Suzlon a fully vertically integrated energy equipment provider. Q3) What can be the possible future expansion strategies of Suzlon Energy? Since Suzlon has gained a good foothold in the European market and has good access to state of the art technology; Suzlon should look to consolidate its global position now in the market. It should not make more acquisitions and rather utilize the capital for R&D purposes and look to improve its product. It should constantly keep innovating and lower costs so that it always has the competitive edge in the market. This will also help Suzlon in consolidating its global position. Moreover Suzlon should also focus on developing its brand image as its competitors have huge brand recognition and can take on low costs provided by Suzlon through their band. Thus Suzlon should also focus on advertising activities to further focus on building the brand.