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Strategic Analysis of Larsen & Toubro

Limited

Submitted to:
Prof. Brajaraj Mohanty
Submitted by:
Group-9 (BM1-Section B)
Akasdeep Bhadra
Aditya Sengar
Nandita Nayak
Saurabh S Rajendraprasad
Vineet Thakur

UM15064
UM15084
UM15092
UM15108
UM15122

Contents
1

Executive Summary............................................................................................................................................................... 5

Industry Overview.................................................................................................................................................................. 6
2.1

Nature and Size of the Industry....................................................................................................................................... 6

2.2

Key Growth drivers for the Industry................................................................................................................................. 8

2.3

Identification of Critical Success Factors (CSF)................................................................................................................ 8

2.4

Industry Benchmarks....................................................................................................................................................... 9

2.5

PESTEL Analysis............................................................................................................................................................. 14

2.6

Porters Five Forces Analysis.......................................................................................................................................... 16

2.7

Strategic Group Mapping:.............................................................................................................................................. 18

2.8

Competitive Landscape................................................................................................................................................. 18

2.9

Market Segmentation.................................................................................................................................................... 19

2.10 Buying Criteria Analysis of the Industry......................................................................................................................... 20


2.11 Key trends and future developments............................................................................................................................. 21
3

Company Overview.............................................................................................................................................................. 22
3.1

Company background:................................................................................................................................................... 22

3.2

Timeline with key milestones and their strategic impact............................................................................................... 22

3.3

Vision, Mission, Goals:................................................................................................................................................... 25

3.4

Key Product and Service Portfolio.................................................................................................................................. 26

Construction..................................................................................................................................................................... 26

Construction & Mining Machinery..................................................................................................................................... 26

Electrical & Automation.................................................................................................................................................... 26

Heavy Engineering............................................................................................................................................................ 26

Hydraulics......................................................................................................................................................................... 27

Hydrocarbon..................................................................................................................................................................... 27

Metallurgical & Material Handling..................................................................................................................................... 27

Power................................................................................................................................................................................ 27

Power Development Limited............................................................................................................................................. 27

Rubber Processing Machinery........................................................................................................................................... 27

Shipbuilding...................................................................................................................................................................... 27

Technology Services......................................................................................................................................................... 28

Valves............................................................................................................................................................................... 28

3.5

Core Competencies of the firm...................................................................................................................................... 28

3.6

Business Model of the organization............................................................................................................................... 29

3.7

3rd Generation Balanced Scorecard (Amalgamation of 1st Generation BSC and Activity System Map)........................32

3.8

SWOT Analysis............................................................................................................................................................... 35

3.9

Competitor Analysis (identify competitors)................................................................................................................... 36

3.9.1

Based on Critical Success factors............................................................................................................................ 36

3.9.2

Based on Financial indicators.................................................................................................................................. 37

Future Growth Strategy for the organization........................................................................................................................ 38


4.1

Portfolio Analysis........................................................................................................................................................... 38

4.2

Companys Strategic Roadmap for future...................................................................................................................... 41

4.3

Re-imagining the Organization with the transformed business model or Use-case based on SMAC and IOE................42

1 Executive Summary
Guidelines

The executive summary should provide a brief overview of the organization and the industry in which it
operates. It should also illustrate the results of the analysis made in the report. It should provide the
future growth prospects in the industry for the organization. It should also highlight on the strategy for
any organization to gain competitive advantage in this industry.

Larsen & Toubro (L&T) is a technology-driven engineering, construction and manufacturing USD 14.8 Billion Indian company
that infuses engineering with imagination. The company has business interests in engineering, construction, manufacturing
goods, information technology, and financial services, and also has an office in the Middle-East and other parts of Asia. L&T is
India's largest engineering and construction company.
Our analysis has not considered its IT and Financial services which are part of their diversification. Its core competency lies in
engineering and construction.
The Indian Engineering sector has witnessed a remarkable growth over the last few years driven by increased investments in
infrastructure and industrial production and is closely associated with the manufacturing and infrastructure sectors, which are of
strategic importance to Indias economy. The Indian engineering sector is divided into two major segments - heavy engineering
and light engineering. The capital goods and engineering turnover in India is expected to reach US$ 125.4 billion by FY17.
Likewise, Electrical equipment market size is forecast to reach US$ 100 billion by FY22. The construction industry has
contributed an estimated 6708 billion to the national GDP in 2011-12 (a share of around 9%).
L&T is in very good competitive position among its competitors in this industry. This is mainly due to their quality, reputation
and broad range of service portfolio. Some its major competitors are BECHTEL, Alstorm, Punj Lloyd, BHEL, etc. As per our
analysis, BECHTEL poses a bigger threat compared to others in this industry.
Their diversification strategy (both related and unrelated) is also visible in their recent restructuring of their organisational
structure in 2011, when they created 11 SBUs in the company.
Even though L&T have suffered losses in some of its units like Shipbuilding, the other units have given good returns. Given the
hydrocarbon boom in West Asia, which is an opportunity of nearly $150 billion, L&T has decided to headquarter its subsidiary in
Sharjah. The company is also giving a major push to manufacturing, of which defence will be a very large part. It should also
focus more on sectors like Switch gear motors, Power projects, Electricals and Electronics in which they have a high potential for
growth.
Technology innovation is the key factor for any company to gain competitive advantage in this industry, in which L&T holds a
very strong position. Also, entering new sectors with high growth potential as early as possible is a good strategy to thrive in

this industry.

2 Industry Overview
2.1 Nature and Size of the Industry
Guidelines

Brief Description of the industry segment or sub segment


History and Evolution of the Industry
Position of Industry depending on Industry Life Cycle (Introduction, Growth, maturity, decline)
Size (% of National GDP) of the industry

History and Evolution of the industry

The period from 1950 to mid 60s witnessed the government playing an active role in
the development of these services and most of construction activities during this period
were carried out by state owned enterprises and supported by government
departments. In the first five-year plan, construction of civil works was allotted nearly
50 per cent of the total capital outlay.
The first professional consultancy company, National Industrial Development
Corporation (NIDC), was set up in the public sector in 1954. Subsequently, many
architectural, design engineering and construction companies were set up in the public
sector (Indian Railways Construction Limited (IRCON), National Buildings Construction
Corporation
(NBCC),
Rail
India
Transportation
and
Engineering
Services
(RITES), Engineers India Limited (EIL), etc.) and private sector (M N Dastur and Co.,
Hindustan Construction Company (HCC), Ansals, etc.).

Key Consumers of this industry and


their changing needs

This industrial construction includes the building, renovating, preservation, repair, and
destruction of buildings;
Residential, it covers housing and Development

Industrial, it includes Industrial Parks, Factories, Plants


Corporate, it includes Office and research Centres.
Commercial includes retail, shopping malls, Showrooms, Hotels
For Road and Rail Network
Stage in the Industry Life cycle

Huge amount of investment in needed in the infrastructure sector in India. The focus of
the same can be seen in the budget speech of the Finance Minister. Hence the industry
is in growth stage.
Heavy engineering is in decline stage
Power sector, renewable energy sources (RES), rail and road and construction
equipments are in growth stage
Hydrocarbon is in maturity stage
Defence is in introduction stage

Total Available Market Size (National


and Global)

The global construction industry has regained growth momentum, with the pace of
expansion accelerating from an annual average of 2.7% a year in real terms in 2011
2013 to 3.1% in 2014. Timetrics Construction Intelligence Centre (CIC) forecasts a
further rise to 3.8% in 2015, and then an average annual increase of 3.9% over 2016
2020. Based on the CICs Global 50, a grouping of the 50 largest and most influential
markets in the world, the global industry is projected to grow from US$7.4 trillion in
2010 to US$8.5 trillion in 2015 and to US$10.3 trillion in 2020, when measured at
constant 2010 prices and exchange rates (real 2010 US$).
The construction industries in the Middle East and Africa region are predicted to be the
fastest growing in 2016-2020, overtaking the Asia-Pacific region, which held the top
spot in 2011-2015. This reflects the huge investment in infrastructure and buildings
that is taking place in Qatar, Saudi Arabia and the United Arab Emirates (UAE), while
the slowing rate of growth in China's construction industry is a key factor driving the

deceleration in Asia-Pacific. However, Asia-Pacific's share of the global construction


industry will continue to rise, reaching close to 49% in 2020, up from 40% in 2010.
Total Serviceable Market Size (National
and Global)

2.2 Key Growth drivers for the Industry


Key Growth drivers

Rationale

1. Oil Prices
2. Population
3. Investment in mining projects
4. Labour disputes
problems

and

chronic

5. Economic growth

1. Oil prices: Low oil prices discourage infrastructure development in oil extraction
sector
2. Population: Growth in working age population encourages infrastructure
development
3. Investment in mining projects: High investment in mining projects encourages
infrastructure development in mining industry.
4. Labour disputes and chronic problems: Ongoing labour disputes in construction
industry hamper the growth of the industry
5. Economic growth: High economic growth ensures growth in construction sector
too

2.3 Identification of Critical Success Factors (CSF)


Critical Success Factor identified
CSF

1 Maintaining
quality

time,

cost

Rationale
and

CSF 2 Retention and attracting new


customers

It is considered to be a golden triangle for infrastructure projects.


Retention and attracting new customers is very important for sustaining the company.
For this the company needs to maintain good brand image and reputation.

CSF 3 Use of advanced technology and


technical expertise

Advanced technology and technical expertise brings efficiency in company operations

CSF 4 Availability of resources and


manufacturing capabilities

Availability of resources and its optimum use along with higher manufacturing
capabilities/capacities gives front end advantage over its competitors

2.4 Industry Benchmarks


Size of industry:

Category

Industry Average of Top 5 Firms or


players serving 75-80% of the market

Indicator

201112
Industry Level
(National)

Activity Ratios

Market Size

201213

201314

2014-15
(till Q3)

177.68

193.44

215.09

Market Leader
201112

2012-13

201314

2014-15
(till Q3)

165.23

Size as % of
GDP

9.7

10.39

10.5

Inventory
turnover

23.56

21.34

21.78

23.7

29.47

28.83

28.83

26.07

Receivables
turnover

1.56

2.1

2.3

1.6

3.41

2.94

2.56

2.56

Payables
turnover

Category

Liquidity Ratios

Solvency Ratios

Profitability Ratios

Indicator

Industry Average of Top 5 Firms or


players serving 75-80% of the market

Market Leader

201112

201213

201314

2014-15
(till Q3)

201112

2012-13

201314

2014-15
(till Q3)

Asset
turnover

1.2

1.32

0.89

0.92

1.59

1.64

1.26

1.16

Current ratio

0.9

1.1

1.15

1.2

1.15

1.31

1.26

1.34

Quick ratio

0.97

1.2

1.22

1.25

1.22

1.29

1.47

1.43

Debt-toassets ratio

0.189

0.457

0.198

0.213

0.247

0.659

0.254

0.249

Debt-tocapital ratio

0.31

0.23

0.3

0.31

0.36

0.27

0.34

0.33

Debt-toequity ratio

0.31

0.23

0.3

0.29

0.36

0.27

0.34

0.33

Interest
coverage
ratio

5.6

6.92

8.72

4.79

7.57

7.21

7.21

5.47

Gross profit
margin

9.2

8.3

9.32

8.56

10.5

9.18

10.37

9.61

Operating
profit margin

9.87

9.56

9.67

10.65

11.81

10.52

11.77

11.37

Net profit
margin

8.23

7.59

8.32

8.00

8.38

8.06

9.7

8.86

Return on

379.78

423.79

312.57

378.24

411.53

473.24

362.95

398.78

Category

Indicator

Industry Average of Top 5 Firms or


players serving 75-80% of the market

Market Leader

201112

201213

201314

2014-15
(till Q3)

201112

2012-13

201314

2014-15
(till Q3)

70.23

72.1

78.45

79.12

73.43

73.17

81.77

81.53

62.13

71.2

54.67

51.25

65.01

72.77

59.26

54.39

Book value

324.89

402.87

423.78

312.56

358.45

411.53

473.68

362.95

Sales

41209

58476

51907

52869

43905

60873

53170

56598

Dividend
Yield

812.74

1000.46

1103.67

1287.46

882.84

1010.46

1138.57

1316.89

assets (ROA)
Return on
equity (ROE)
Price to
Earnings
(P/E)
Valuation Ratios or
Price Ratios

Projected
Annual
Growth in
Earnings per
Share
Price to Cash
Flow

2.5 PESTEL Analysis


Category

Description

Political

Economic

Social

Key factors for analysis

Rationale

SEZ ACT, FDI LIBERALISATION,

REITS have boosted the investment

IMPACT OF REITS

The government of India has permitted a


Foreign Direct Investment of 100 % for
development of townships in India.

There are 105 approved SEZs in India.


Laws governing these zones are more
liberal in nature than the centralized laws

construction is the largest component of


GDP. It has been growing at a rate over 10
% in the past few years when GDP was
around 8%

Changes in the demand due to factors like


changes in disposable income of
perspective buyers and inflation may
affect the construction industry

Many builders tend to stop work when the


prices of inputs like cement, iron etc go up
and wait till the prices come down. Hence
unnecessary delay

A low credibility or image can lead to poor


financial performance.

A green building is one which uses less


water, optimises energy efficiency,
conserves natural resources, generates

GDP GROWTH , CHANGE IN


DEMAND , PRICE FLUCTUATION
OF INPUTS

GOODWILL OF THE COMPANY ,


GREEN BUILDINGS

less waste and provides healthier spaces


for occupants, as compared to
conventional building
Technological

UPGRADATION OF
TECHNOLOGY ,

Due to lack of technology, construction


can suffer in terms of quality and design.

READY MIX CONCRETE

The business of ready mix concrete in


India is in its infancy. Indian ready mix
concrete business uses only 2% of the
total cement production

Environmental

NATURAL CALAMITIES

Uncertain environmental hazards like


earthquakes, floods etc. have a disastrous
impact on the construction industry and can
delay construction as well

Legal

NATIONAL HOUSING POLICY

NHP (1998) was formulated to address the issue


of sustainable development of infrastructure.
The Government helps to provide fiscal
concession to carry out legal and regulatory
reforms and create and enabling environment
for the construction industry

2.6 Porters Five Forces Analysis


1. The threat of new entrants:
It is recognized that the construction industry is, in the main, confined to competition from established companies. This is
particularly so in the sectors of Non-residential Building and Infrastructure because the construction industry operates
differently to other industrial or economic sectors. Companies require manpower resources, plant and equipment, health and
safety procedures and various insurances to be in place together with an established track record to be able to even bid for
work in the important sector to develop roads, bridges, ports, airports which form the infrastructure of a nation and cannot be
handled lightly. Consequently, these requirements impose significant barriers to entry to the construction market resulting in
competition not from international companies or new entrants but being confined largely to existing and established
companies. The threat of new entrants therefore, in the important sectors is low as the consideration is towards an
established track record. However, in the residential segment, where focus is on lower bids and cheapest tenders, threat of
new entrants can possibly be very high as the contractors would prefer lower costs as compared to loyalty to an established
company.
2. Bargaining power of suppliers:
The bargaining power of the suppliers is high keeping in view the shortages of labour and the constantly rising prices of the
inputs. The constantly rising input prices and the acute labour shortages in the construction industry lead to a very high
power in the hands of the suppliers to affect the price. The same surveys point to the need to hinge on project management,
mechanization and pre advanced technology to handle the situation.
3. Bargaining power of buyers:
It appears that construction industry experienced its peak till the 2000s, the sector lately had been dying and was on a
declining trend due to stringent regulations, lack of financial resources, non-availability of materials, inputs.
There, therefore exists a huge demand and supply gap and there is an even increasing demand for construction due to rapid
urbanisation.
The bargaining power of the customers is therefore, on a low in the present scenario. However, if the
customer
is
the
government, or the one that brings the greatest demand in the infrastructure sector, its ability to assert pressure on the price
is high as they buy undifferentiated products also price will largely be based on the quality provided and will not be agreed to
blind folded by the government.

4.The threat of substitute products:


There is little threat of substitution of site-based infrastructure construction activities although the future may see an increase
in
the
prefabrication
of
buildings
or
other
factory- based building techniques. Also, it is obvious in the sense that infrastructure in terms of airports, ports, railways
cannot be substituted by means of any substitute products or services. Neither can a demand for a house be substituted
with its substitute good. Also in terms of the inputs being used in the industry, the same cannot be substituted very easily as
compromising on the quality of the materials being used will ultimately affect the foundation of the very construction which
may become very likely to collapse on account of substandard material that has been used.
5. Existing rivalry among the firms:
As already explained above, construction sector is very competitive amongst the existing firms. With the system of awarding
tenders to the lowest bidder, the competition increases manifold. Also, in segments of non-residence, infrastructure etc., onus
is on the established firm to meet the standards as laid won by the government. Companies require manpower resources,
plant and equipment, health and safety procedures and various insurances to be in place together with an established track
record to be able to even bid for work in the important sector to develop roads, bridges, ports, airports which form the
infrastructure of a nation and cannot be handled lightly. Consequently, these requirements impose significant barriers to
entry to the construction market resulting in competition not from international companies or new entrants but being
confined largely to existing and established companies.

2.7 Strategic Group Mapping:


Projects in variety
of sectors like
Power, Transport,
Real Estate, etc.

PROJECT
VARIETY
Projects only in
core-competency
sectors

L&
T
SHAPOORJI
PALLONJI
ENGINEERIN
G
CONSTRUCTI
ON

BHEL,

PUNJ
LLOYD,

BECHT
EL

ALSTO
M

LANCO
INFRATECH

DLF
Only India

India and a few other


regions

Global span

PROJECT SPAN

2.8 Competitive Landscape

Value propositions ( Low Cost, Differentiation, Niche): Low Cost, due to economies of scale
Competitive Strength Assessment (Normal and Weighted):

2.9 Market Segmentation


Key Products and/or Services

Regions

Construction

India, Australia, Nepal, Algeria, Oman, Bahrain, Qatar, Bangladesh, Russia, Bhutan,
Saudi Arabia, Germany, Sri Lanka, Iraq, Sudan, Jordan, Suriname, Kenya, Tanzania,
Kuwait, UAE, Malaysia, Uzbekistan, Maldives, West Indies, Mauritius, Yemen,
Mozambique

Hydrocarbon Engineering

India, Middle East Region

Power

India, Bangladesh

Metallurgical & Material Handling

India

Heavy Engineering

India, Oman

Shipbuilding Defence & Merchant

India

L&T Valves

India, Middle East

EWAC Alloys

India, Middle East, South East Asia

L&T Technology Services

India, Middle East, South East Asia, USA, Canada, Western Europe, South Korea,
Japan

L&T IDPL

India, Singapore

L&T Metro Rail

India

L&T Realty

India

Electrical & Automation

India, Middle East, Malaysia

Construction & Mining Machinery

India

2.10 Buying Criteria Analysis of the Industry


Parameter

Details

End-user Segments

Significance Attached (Low,


Medium, High)

Quality of previous projects

Overall quality of the projects


undertaken before and the
clients satisfaction with
those previous jobs

Government

High

Corporate

High

Total capability of the firm


must be considerably higher
than the size of the order
from the client

Government

High

Corporate

High

Manufacturing Capability

Financial Resources

Technology

Price of Projects

The firm must have big


enough financial resource
depending on the size of the
order

Government

High

Corporate

Medium

The firm must have the latest


technology to efficiently fulfil
the order from the client

Government

Medium

Corporate

High

All the firms in this category


generally have a similar
competitive pricing for clients

Government

Medium

Corporate

Medium

2.11 Key trends and future developments


Key Trend

Impact on Industry (Low, Medium, High)

Certainty of Impact (Low probability,


medium probability, high probability)

Venturing into every new category in


the field of construction and
Engineering

High Impact

High Probability

L&T has ventured to almost every new opportunity available, eg: Nuclear, Defence

This will ensure them the first movers advantage in these categories

This trend also helps in expanding the firm

3 Company Overview
3.1 Company background:
Larsen & Toubro is a major technology, engineering, construction, manufacturing and financial services conglomerate, with
global operations. L&T addresses critical needs in key sectors - Hydrocarbon, Infrastructure, Power, Process Industries and
Defense - for customers in over 30 countries around the world.
L&T is engaged in core, high impact sectors of the economy and our integrated capabilities span the entire spectrum of
design to deliver. With over 7 decades of a strong, customer focused approach and a continuous quest for world-class
quality, we have unmatched expertise across Technology, Engineering, Construction, Infrastructure Projects and
Manufacturing, and maintain a leadership in all our major lines of business.
Every aspect of L&T's businesses is characterized by professionalism and high standards of corporate governance.
Sustainability is embedded into our long-term strategy for growth.
The Companys manufacturing footprint extends across eight countries in addition to India. L&T has several international
offices and a supply chain that extends around the globe.

3.2 Timeline with key milestones and their strategic impact


1938 - Company was founded in Bombay (Mumbai) in 1938 (British India) by two Danish engineers, Henning Holck
Larsen and Soren Kristian Toubro.
1946- Larsen & Toubro Private Limited was incorporated on 7th February. L&T started its business as manufacturer/
importers/ exporters/ contractors in the fields of civil, mechanical, electrical and agricultural.
1969- Two subsidiary companies Alu Capsules Ltd & India, Crown Cork Co. Ltd were amalgamated with the company.
1975- L&T commissioned a plant for the manufacture of multipurpose hydraulic excavators and high pressure hydraulic
system in collaboration with Poclain, S.A. France at Bangalore.
1977- L&Ts Faridabad unit became operational and started manufacturing of switch gears.

1979-1982 Merger and amalgamation of its various units into parent company.
1983- Establishment and commercial operation of its 1 Million Ton capacity Cement Plant at Chandrapur District,
Maharashtra.
1984-1990- L&T collaborated with many foreign players across globe for setting up manufacturing centers of various
products which includes Dot Matrix Printers, Floppy Disc Drives, Mobile Cranes, Axial Piston Units, Medical Electronics
Products, rotatory mills, Ash handling system for coal based thermal power plant etc.
Company also raised a lot money by issuing debentures and utilized the same in setting up of various manufacturing units
across India.
1991- During the year a major contract was signed for augmentation of the Trisuli Hydro Power Project in Nepal.
1994- The company tied up with Sargent & Lundy U S A., to offer EPC service for thermal power projects and also to form a
joint venture engineering company. This joint venture would offer engineering services to power projects in India and abroad.
1995- During the year a new cement plant at Kovaya in Gujarat with annual capacity of 15 lakh tons was commissioned.
Collaboration and JV with major players like Samsung Electronics Co. etc.
1997- The private sector giant Larsen and Toubro (L&T) will introduce 300 varieties of computerised ready mix concrete for
the first time in the country so as to develop a new concept in the building industry.
Larsen & Toubro Ltd (L&T) has entered into a 50:50 joint-venture with Komatsu, Japan, to manufacture hydraulic excavators
and components.
1998-2001- Continuous order flow from all the diversified sectors lead to high growth rate of the organization. Increases its
existing capacity of cement production. Formed other collaboration and JVs with foreign players.
2002- Buys over the shareholding of Caterpillar, USA, in its joint venture Tractor Engineers Ltd. (TENGL), makes it wholly
owned subsidiary.
Financial Institutions stake increases in L&T to 37%.
Receives prestigious contract to build an eight tower hotel-cum-residential complex in Dubai's upmarket Sheikh Zayed Road.
L&T, Shapoorji Pallonji form joint venture to take up Cyber Tower project in Mauritius.
Bags Rs 5810 million turnkey refinery order from IOC.

Hiked its capacity to 16.5 million tons thus gaining its position as the largest cement company in India, overtaking the
capacity of ACC.
2003- Revamps Engineering Division, splits it into four divisions (Buildings & Factories, Civil Infrastructure, Industrial Projects
& Electricals).
Obtains four licenses, issued by the central government, for design, manufacture and assembly of warships, submarines and
weapon platforms, radar and sonar systems and electronic warfare equipment and systems sensors, weapon launchers and
armaments including missiles and rockets. Besides, the company also receives the governments nod for design and
development of sophisticated armored and other combat vehicles and bridge-laying systems on tanks.
2004- Enters into JV with John Deere for tractor manufacturing.
2007- The Boeing Company on February 08, 2007 has signed a Memorandum of Understanding (MoU) with the Larsen &
Toubro Ltd. for the joint exploration of business opportunities in India's defense sector.
Larsen & Toubro Ltd (L&T) have signed on February 15, 2007, a Memorandum of Understanding (MoU) with Dassault
Systmes (DS), which has head offices in France.
Larsen & Toubro (L&T) will set up joint ventures with Japan's Toshiba Corp and Mitsubishi Heavy Industries (MHI) to
commission manufacturing facilities for super-critical turbines and boilers, which are used in coal-fired power generation
plants.
2010-2011- Brings the concept of independent companies (ICs) under its organizational structures. Internally divided L&T
into 9 ICs for better managerial control.
Other than the above mentioned happenings one thing was common for L&T and it was continuous order flows with high to
very high project value both from domestic as well as foreign market.

3.3 Vision, Mission, Goals:

MISSION STATEMENT:
L&T shall be a professionally-managed Indian multinational, committed to total customer satisfaction and enhancing
shareholder value.
L&T shall be an innovative, entrepreneurial and empowered tam constantly creating value and attaining global benchmarks.
L&T shall foster culture of caring, trust and continuous learning while meeting expectations of employees, stakeholders and
society

3.4 Key Product and Service Portfolio

Construction

Buildings & Factories

Transportation Infrastructure

Heavy Civil Infrastructure

Water & Effluent Treatment

Renewable Energy

Power Transmission & Distribution

Smart World & Communication

Construction & Mining Machinery


o

Construction & Mining Equipment

Electrical & Automation


o

Relays

Meters

Automation Products & Systems

Low Voltage Products

Medium Voltage Products

Marinised products

Control & Automation

Marine Switchboards & Control Systems

Control & Automation

Low Voltage Systems

Medium Voltage Systems

Meters

Marine Solutions

Automation Products & Systems

Heavy Engineering
o

Process Plant

Nuclear Power Plant

Defence & Aerospace

Critical Piping

Hydraulics
o

Hydraulic Cylinders

Swivel / Rotary Joints

High Torque Low Speed Motors

Radial Piston Pumps

Customised Hydraulic Systems

Hydrocarbon
o

Upstream

Mid & Downstream

Construction & Pipelines (HCP) Projects

Metallurgical & Material Handling


o

Metallurgical & Material Handling

Power
o

Coal Based Power Plants

Gas Based Power Plants

Power Development Limited


o

Thermal Power Projects

Hydro Power Projects

Rubber Processing Machinery


o

Mechanical Tyre Curing Presses

Hydraulic Tyre Curing Presses

Tyre Building Machines

Auxiliary Equipment

Spares

Tube Curing Presses

Bladder Curing Presses

Shipbuilding
o

New Construction - Defence Shipbuilding

New Construction - Commercial Shipbuilding

Ship Repairs, Refits & Conversions

Technology Services

Industrial Products

Medical Devices

Polymer

Process Industry

Telecom & Hi-tech

Transportation

Embedded System and Applications

Engineering Process Services

Mechanical Engineering

Product Lifecycle Management (PLM)

Engineering Analytics

Internet of Things and Machine to Machine

Power Electronics

Valves

3.5 Core Competencies of the firm


L & Ts Core Competencies-1 Process Technology: Cement and Mineral Process, Chemical Engineering, Material

Science and Corrosion Engineering, Mechanical Engineering, Ocean Engineering and Water Technology.
Basic and Detailed Engineering Services: Electrical and Instrumentation Engineering, Front-End Engineering and Design,
and specialized SBUs for Oil and Gas Engineering services.
Modular Fabrication: Through one of Asias largest yards at Hazira, capable of manufacturing several modules
simultaneously.
Procurement: An extensive set of suppliers from around the globe, networked through an online procurement and an ebusiness platform.

L & Ts Core Competencies-2 Project Management: L&T is one of the first companies in the world to implement the
Enterprise Resource Planning (ERP) software SAP R/3 in E&C business. This integrates all the execution processes for the
project and also provides to the project team unique access to information at all stages - from proposal to project handing
over.
Construction: Through ECC - executing comprehensive construction projects in areas of power, oil & gas exploration,
refinery, fertilizer and petrochemicals, airports, townships, hotels, public buildings, bridges, transmission lines, water
treatment plants, hydro-electric power stations and irrigation structures in various countries .

3.6 Business Model of the organization


Key Partners

Key
Activities

L&T has large no. of JVs with some of the world


leaders to name a few are MHPS, Sargent &
Lundy, Gulf, AIL, Valdel etc.

L&T has formed JVs with partners basically as a


part of technology transfer. JV provides the
advanced process technology and L&T gives
them a world class manufacturing & execution
facility.

Key activites of L&T are executing EPC/ Turnkey


projects and manufacturing of diversified
products.
It also provides services to different customers.
L&T is basically into B2B marketing so has it has
a huge base of its own sales force however
certain products like switch-gears are also sold
via third party.
Customers are given full fledge training on
operation of projects/ products.

Categories
Production
Engineering, Procurement & Construction
Engineering services/ project consultation
Sales & Marketing
Maintenance and after sales services.

Projects undertaken by L&T follows golden

Characteristics

Value

Motivations for partnerships


Very good reputation of L&T as market leader
in engineering and construction industry of
India.
L&T works on a huge base of professionals
who have a sound technical knowledge.
High resource base could be used for
economies of scale.

Propositions

Customer
Relationship
s

triangle i.e. on time, within cost and best quality,


this is big satisfactory reason for customer.
L&T manufactures wide variety of products with
lot of customization as per the needs of the
client.

Most of the L&Ts revenue comes from big


projects which are given by B2B customers/
clients. So company maintains a healthy
relationship with them. The company also
maintains cordial relation with the
retail/individual business for some of its
manufactured products like valves, switchgears
etc. They contribute less significantly but they
are also important in order to have a hold over
the individual/retail market.
The company spends in customer retention and
ensures customer satisfaction, so that the
customers become repeat purchasers as well as
brand loyal. The same is done by activities like
after sales service, customer training etc.
Government of India as well as ruling authorities
L&T operates into diversified sectors which
of other regions like Middle East, Bangladesh etc,
includes:are one of the major customer segment of L&T.
- Power Sector
- Hydrocarbons
Private players like GVK, GMR Jaypee Infra also
- Electrical & Automation
gives a large amount of orders to L&T.
- Metals & Machineries
L&T also caters to retail customers via its
- Defence
distribution network for products like switch
- Rail & Metro etc
gears etc.
Physical
L&T has both fixed and movable assets pan India. Manufacturing centres/ factories, offices and movable
construction equipment are the major source of physical assets of L&T.

Key
Resources

Advanced Technology
Customization
Low Price
On time, within budget and quality focused

Customer
Segments

Channels

Intellectual (brand patents, copyrights, data)


L&T forms JV with various world leader for technology transfer this is one the most intellectual property
of L&T. L&T has also many patents/ copyrights/ trademarks under its name, for example from 19992000 to 2011-12, its electrical and automation sector has filed 856 patent applications, 256 design
registrations, 110 trademark applications and 20 copyright applications.

Human
L&T has an employee base of around 85000 people with diverse background. These technical experts
are the major factor for its project success rate and innovation. It follows MBO for performance
management and has one of the robust PMS systems. People have grown from junior engineer level to
CEO.

Financial
L&T has over one lakh crore of market capitalization and a huge order base makes it an organisation
with strong financials. Its year on year increase in profit and EPS makes it a good option for
shareholders.
L&Ts major business is dependent on B2B sector and out of which major projects/ orders comes via
bidding procedure. For this L&T has its own sales and marketing team for each independent company or
SBUs.
For businesses like construction & mining machineries, products under electrical & automation sector;
L&T uses its own as well as third party distribution network pan India who are responsible of sales and
after sales services on products.
As already known L&T is a project based
The business is mainly cost driven. The cost of
company so maximum (around 65%-70%)
procurement of raw materials and the
portion of cost is contributed by raw materials/
operational efficiency and timely completion
construction materials (involves its procurement,
determines the success in this sector.
logistics and storage).
It also tries to create value in the mind of
customer by several ways. The industry tries
to achieve economies of scale by proper
optimum utilization of resources.
Types
L&T is Indias top construction company and is
Contracting Charges from customer.
also in worlds top 30 construction company. The
effect of same is also seen in its revenue as its

Cost
Structure

Revenue
Streams

construction segment accounts for more than


55% of the revenue.
L&Ts other major sources of revenue comes
from Hydrocarbon and Power sectors which
accounts for about another 25%-30% of their
total revenue.

Sales of Products & Services.


Fixed pricing
Raw material and manpower costs are fixed
per project.
Dependent on type and features of products &
services.

3.7 3rd Generation Balanced Scorecard (Amalgamation of 1st Generation BSC and Activity System Map)

Financials

Even though the above data is not positive for L&T but, as per the expectation of growth in Indias infrastructure sector pickup in execution in long-gestation projects will drive 20% revenue CAGR over FY16-18F in the core E&C business of L&T. Also
earnings is expected to pick up from FY17F and its estimated a 35% EPS CAGR for L&T over FY2016-2018.

Customer
L&T continues with a reputation of completing its project within budget and schedule while maintaing a good quality.
This has helped the organisation a lot in retention of its customer base and attracting new clients.
L&T is also venturing into new foreign markets to enlarge its customer base. Company is leveraging on its economy of
scope and learnings from its complex project execution in Indian environment.

Internal Processes
L&T has divided its complex and diversified businesses into nine independent companies (ICs). These ICs have their
own financial statements and its own organisational structure and board of directors. This has helped L&T a lot in
managing the complex organisation and setting up of individual goals, targets and startegies.
L&T has its own startegy of supporting & developing small vendors as per their requirements. This vendor
development prcosess gives a huge cost benefit to them. This also helps in maintaing a good and long term relation
with supplies.
L&T looks into the new and emerging sectors as per their economies of scope and leverage on the same to gain the
first mover advantage.

Learning & Growth


L&Ts top management is focussed on continuos improvement and innovation. L&T has its own pan India R&D offices/
centres whichh caters to the diversified businesses of L&T. As a proof of this in 2012 Forbes business magazine ranked
L&T as the 9th most innovative company in a global study. L&T was rated highest amongst Indian companies that
made the list, and was the only Indian company to feature in the top ten.
L&T is known for caring its employees and in 2014 L&T won a Special Recognition Award for being the Most Attractive
Employer in the infrastructure sector in India. L&T imparts many training programs to their employees which helps
them to improve their technical and manegerial skills.

L&T belives in its employees and gives chances to its employess to grow higher in hierchy. Past two CEOs of L&T have
grown from junior engineer level to CEO position.
As stated above L&T has filled many patent rights, trademarks and copyrights items.

3.8 SWOT Analysis


STRENGTHS:

WEAKNESS:

L&T can utilize its market leadership position & strong brand
name to gain the competitive edge over others and enter into
international market.

L&T has its presence in only 30 countries and its 75


80% of total revenue comes from domestic operation
only. It could affect its operation if domestic market goes
bad or if Indian economy is affected.

L&T is into engineering & construction of diversified sectors


which includes Infrastructure, Power, Hydrocarbon, Defence
etc. Thus the revenue generation capability of L&T is also
diversified which highly reduces the risk of market fluctuations.
L&T has a strong workforce of around 85000 employees. It has
a strong management team as guiding force with people who
have grown in L&T and have strong technical expertise in their
fields.
It has strong and technologically advanced manufacturing
capability centres either in-house or via JV Partners. The same
has been showcased by manufacturing the world's largest coal
gasifier, the world's longest limestone conveyor etc.
L&T with its huge and growing order book ensures continuous
revenue growth and a strong financial backbone.

Cash conversion of the projects taken by L&T is not good


as the customers are performing badly and are not being
able to pay.
Poor/ slow cash conversion rate, decreasing profit margin
and increasing debts is hampering the financial flexibility
of L&T.
The interest costs of L&T has been rising due to higher
borrowing by the company, L&T pays around 20% of its
PBIT as interests.
L&T has become a giant with an employee base of
THREATS:
85000, this sometimes reduces the process efficiency of
the organisation.
With entry of foreign players as well as growth of
domestic players L&T is expected to face the intense
competition and this would reduce the profit margin.
Increasing cost of construction and raw material would
further decrease the profit margin.
Due to the stagnation or poor growth of sectors like
hydrocarbon and power sector, L&Ts operation is going
to be affected.
Due to challenging policies like Land Acquisition Bill etc,
there are execution delays which hampers the project
progress and will result in slow cash conversion and
stagnation of resources employed by L&T.

OPPURTUNITIES:
L&T understands the domestic market very well and seeing the
opportunities it enters into strategic joint venture with world lead
players to gain the first mover advantage. Few of its JV partners are
Sargent & Lundy, MHPS, Valdel, Gulf, Howden, AIL etc.
With the high growth of Indian economy
huge investment
is
Weight
L&T
Punj
Factors
expected in infrastructure sector of India. L&T being the industry
Lloyd
leader in construction sector will gain the advantage of it.

3.9 Competitor Analysis (identify competitors)


3.9.1 Based on Critical Success factors
Shapoo
rji
Pallonji

BHEL

Alsto
m

Becht
el

Lanco
Infra

DLF

Past
0.1Middle East,
8 Bangladesh,
6
7
L&T
hasExperience
established itself in regions like
Africa
where a huge
demand
project
is expected
to 8
Maintaining
Time,
Costof&infrastructure
0.25
8
8
come.
Quality

L&T is expected to gain the first mover advantage as government


Retention/ Attracting
0.2
8
6
has opened the sectors like Nuclear Power, Defence, Space,
Clients
Renewable energy etc. for private players.

PMG Team & Technical


Expertise

0.15

Availability of Resources/
Capability

0.15

Use of Advanced
Technology

0.15

Weighted Total

1.0

8.3

7.1

7.2

7.6

7.55

7.25

4.4

5.7

Based on the critical success factors we can say that L&T has the competitive advantage over other players. BHEL and
Alstom are the nearest competitors to L&T and its basically because of their presence in diversified industries. Bachtel is a
world leader and is new to Indian Market, scenario may change once Bachtel goes for aggressive penetration in Indian
market.

3.9.2 Based on Financial indicators


Indicators

L&T

Punj Lloyd

BHEL

Alstom

Lanco Infra

DLF

Market Cap (Rs.


Cr.)

100227

726

22237

3790

1416

15859.15

Sales Turnover (Rs.


Cr.)

57017

5068

30183

2197

1396

3015

Net Profit (Rs. Cr.)

5056

-506

1419

178

-672

940

Total Assets (Rs.


Cr.)

49384

7759

34146

976

8619

27825.37

EPS (Rs.)

54.39

-18.26

5.80

26.34

-2.73

5.28

Seeing the financial indicators also we can say that Larsen & Toubro is way ahead of its competitors and has a very large EPS
value as compared to others.

4 Future Growth Strategy for the organization


4.1 Portfolio Analysis

Larsen and Toubro has been a bellwether of Indias development process. It has the maximum number of government
projects in its kitty and has been handling a host of infrastructure projects. It has been in the good books of the government
which helps it in the lobby and grabbing the opportunities of the key and strategic projects.

The global economy is expected to grow 3.5% in 2015 with improved economic indicators in US. However, fragility may
continue in Euro zone and the pace of development is expected to slow down in China in 2015. Although new investments in
Oil & Gas Sector in the Middle East may get impacted due to low crude oil prices, infrastructure development would remain in
focus. Successful demand recovery process in the key emerging market economies and a staggered roll back of the
accommodative monetary policies of the advanced economies hold the key for a more stable and growth oriented outlook for
the global economy.

Hydrocarbon business has been facing some challenges due to low crude oil prices in the Middle East and due to high bidto-award time in projects. On contrary, as we can see from the report that Infrastructure , Power, services and
shipbuilding has been doing very well and are the reason for the overall profitability of the company

1.

Based on BCG Matrix


Stars

Question Marks

1. Switch Gear motors

1. L&T Mutual Fund

2. Power Projects

2. L&T Solar Power

3.Electrical and Electronics


Growth
Rate
Cash Cows

Dog

1.Finance

1. Fertilisers

2. Aerospace , Infrastructure

2. Cement

3. Shipbuilding

Relative Market Share

3. Insurance, Plastic etc

4.2 Companys Strategic Roadmap for future


Short Term focus sectors Infrastructure, smart cities, Metros power and power distribution , manufacturing

These sectors needs immediate focus as with government plans and the need for infrastructure and
manufacturing in India , it entails a very bright and profitable future for the company.

Long Term focus sectors Solar energy, Nuclear Energy, Infrastructure , shipbuilding , hydrocarbon

With the growth and requirement of renewable energy , the energy sectors needs a revamp in the near
future and with the focus on defense and artillery L&T can increase its future profits

4.3 Re-imagining the Organization with the transformed business model or Use-case based on SMAC and
IOE

Reimagining Business Models


L&Ts major changes in business model basically includes the following points: As there is a capital crunch in infrastructure sector from the side of private players, L&T would more concentrate
on PPP models and would increase the bonding with central as well as state governments.
It would utilize the cloud data sharing so that cost involved in sharing of data/ software etc can be reduced and
process can be made more efficient and robust.
Identifying the poor performing areas and to go for systematically disinvestment in those areas, this will reduce
the complexity load on L&T as well as increase the cash inflow.
As L&T would go for disinvestment in certain sectors at the same time they would focus on the emerging trends/
sectors and increase its sectoral portfolio. They would like to leverage the liberal policies of government and

develop their economies of scope to become prominent player in sectors like renewable energy, nuclear power,
defence sector, aerospace sector etc.
L&T is known for executing large projects, now in case of low order inflow they would also target for smaller
projects.
L&T would like to increase its global presence, at present L&T has its presence in only 30 countries. It would like
to utilize its resources at its full capacity and extend its services to some African countries, Bangladesh, Middle
East region, South East Asia etc. This would decrease its dependency on single/ domestic economy.

Reimagining Business Processes


In the early 1990s, executives and managers welcomed information technology databases, PC workstations, and
automated systems into their offices. They saw the potential for significant business gains. Computers wouldnt just
speed up processes or automate certain tasks they could upset nearly all business processes and allow executives
to rethink operations from the ground up. Now its happening again. Powerful machine-learning algorithms that adapt
through experience and evolve in intelligence with exposure to data are driving changes in businesses that would have
been impossible to imagine just five years ago. The PCs and databases introduced during the reengineering of the 90s
have grown up: the rules-based codes written by engineers are giving way to learning algorithms driven by the
machines themselves. Algorithms aim to redesign business processes just like humans did during the original
reengineering movement. Then, reengineering was limited by the speed of humans. Managers noted historical trends
and revised processes, and engineers developed code that was then baked into computing systems. Every update or
response to the market required multiple steps; it cost time and performance. Sometimes, by the time changes were in
place, the market had already moved. With machine-reengineering, process changes are constant and driven not just
by history but also by the predictive capabilities of machine-learning algorithms. Machine-reengineering asks that
people train and actively manage the performance of the algorithms and data models that drive process change,
rather than drive process change themselves. In the same way for L & T, the business processes can be reimagined by
the help of algorithm to bring efficiency in the company operations.

Reimagining Products & Services


Re-Imagining Design to Manufacturing Engineering- Realizing an Integrated Value Chain requires reimagination
of Design to Manufacturing Engineering. It calls for establishing an integrated design environment and
virtualization of manufacturing.
Shorten your time-to-market and launch differentiated products

Disruptive technologies are enabling real-time condition monitoring and predictive modeling to preempt failure
of critical equipment
Reimagining Workplaces
Not long ago, the concept of "work" was narrowly defined as what employees did eight hours a day, five days a week,
within the four walls of the office. It included rigid policies, rote work, hierarchical governance and insufferable
technology. Globalization, mobile computing, more informed buyers and a millennial workforcewho expect more
flexibility and better user experiencehave radically revolutionized the workplace. As such, forward-thinking
companies that are "skating to the puck" are redrawing the boundaries of "the office" to attract the most sought-after
workers and foster a culture of anywhere, any time work. Thanks to the hyper-connectivity made possible by the SMAC
Stack employees can work wherever the technology and corporate policy allow. But a boundary-less workspace is more
than just telecommuting. It also includes the dissolution of linear hierarchy, rigid policy, departmental silos and
outdated technology and culture. L&T should Decentralize decision making, employ collaborative tools, personalize
technology, consider network management environment etc. employees must be empowered to operate at their full
potential and this requires a workplace that has freed itself of unnecessary and debilitating boundaries. It is only then
that companies can hope to meet the business challenges of the fast-changing global economy.

REFERENCES:
www.ukessays.com/essays/economics/construction-sector-of-india-is-an-integral-part-of-the-economy-economics-essay.php
www.moneycontrol.com/financials/larsentoubro/balance-sheet/LT#LT
www.tcs.com/engineering-services
https://en.wikipedia.org/wiki/Larsen_%26_Toubro
http://www.ajol.info/index.php/actas/article/viewFile/87641/77304
http://www.larsentoubro.com/corporate/our-businesses/