A SWOT ANALYSIS ON SUZLON ENERGY LIMITED

by Pramod .. on Monday 25 October 2010, 9:32 PM | Category: Strategy| View: 6737 views
 
 
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 CHAPTER: 1

ABOUT SUZLON ENERGY

 

INTRODUCTION

Suzlon's wind energy business traces its roots back to the incorporation of Suzlon Energy Limited in 1995 by the venture of Mr. TulsiR. Tanti. The company along with its subsidiaries engages in designing, developing and manufacturing of wind turbine generators and related components such as rotor blades, control panels, nacelle cover, tubular towers, generators and gearboxes. Further, the company also provides consultancy, design, manufacturing, installation, operation and maintenance services as well as is involved in wind resource mapping, identification of suitable sites and technical planning of wind power projects. The company principally operates in India, China, The Americas, Europe, New Zealand, South Korea, South Africa and Australia. Suzlon has since grown to become the world's fifth leading wind turbine manufacturer with 10.5% of global market-share and the leading manufacturer in Asia and India. The company has registered 100% year-on-year growth for the past five consecutive years, achieving leadership in India and then becoming the leaders on the global stage. Suzlon is today a leading force on the wind energy stage, generating revenues of USD 2,311 million in FY08 and supplying over 7,000 MW of wind turbine capacity around the world. In just over a decade since Suzlon was born, the company has grown to over 14,000 people around the world with operations in over 21 countries across five continents. The company has forged ahead with an ethos of innovation in everything that it does. This has led to pioneering approaches and offerings such as a fully vertically-integrated value chain, leveraging local expertise and global experience, an 'end-to-end solutions' model and highly customized products – all contributing to make Suzlon the highest-growth, highest-margin wind turbine maker in a highly competitive environment. Suzlon's design, manufacture, operations and maintenance services have been certified as ISO 9001:2000 by Det Norske Veritas. It has a strong presence in the BSE as well as a part of S&P CNX Nifty Index (NSE) that shows investors' satisfaction towards the company and the stability of its stock in the financial market.

 

VISION

Its vision is,

•To be a technology leader in the wind industry

•To be among the top three wind energy companies in the world

•To be the most respected brand

•To be the best team and place to work at

•To be the fastest growing and most profitable business

 

MISSION

The Suzlon Foundation is aligned to the vision of the Suzlon Group of

Companies:

  • having a minimal impact on the natural environment
  • enabling local communities to develop their potential
  • empowering employees to be responsible civil society members
  • committing ourselves to ethical business practices that are fair to all the stakeholders, so that we can collectively contribute towards creating a better world for all.

 

PHILOSOPHY

The philosophy that Suzlon follows are;

  • To be a company that serves society with sustainable wind-power on a commercial scale with a focus on continuously increasing efficiency and reliability of our wind turbines.
  • To always be committed to a life-long relationship with customers and work towards total customer satisfaction.
  • To lay importance on bettering our quality, safety and environmental standards.
  • To build partnerships with all stakeholders; employees, customers, vendors, service providers, local communities and governments.
  • To conduct business only with the highest standards of ethics.
  • To contribute to the reduction of use of fossil fuels by reducing our carbon footprint in all our operations

 

BOARD OF DIRECTORS

 

The Board of Directors, as repositories of corporate powers, act as a guardian to the Company, as also the protectors of shareholders' interests. The Board of the Company represents the finest blend of knowledge and experience.

 

This apex body comprises the following:

 



 

Ajay Relan

Independent Director

 

 

CONCLUSION

Going forward in the new realities of our economic environment, Suzlon is working closely with all industry stakeholders to bridge the crisis in the credit markets and the overall global slowdown. While the wind energy industry will also see an impact of the slowdown, the sector's fundamentals drivers remain strong. The finite supplies of fossil fuels, the threat of climate change and policy measures to drive the growth of renewable energy, will all be key to driving steady growth in the renewable

energy space – and making renewable sources a bigger part of the world's energy matrix. Therefore, without any hesitation the stability and growth prospects of this Suzlon Energy can be easily forecasted both fundamentally and technically.

 

 

 

 

 

 

CHAPTER: 2

 

SWOT ANALYSIS: AN OVERVIEW

 

Introduction

 

A SWOT analysis may sound like a form of mission planning for James Bond. But, SWOT simply stands for: Strengths, Weaknesses, Opportunities, and Threats. It is a business tool available in the tool box of any small business owner. However, running a business forces one to focus on the issues and fires burning today, not tomorrow; this plays an important role to satisfy this requirement.

A SWOT analysis is a planning technique used to understand the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business. It involves stating the objective of the business or project and identifying the internal and external factors that are either supportive or unfavourable to achieving that objective. SWOT is often used as part of strategic or business planning process, but can be useful in understanding an organisation or situation and decision-making for all sorts of situations.

The Concept

The concept of SWOT analysis came from the research conducted at Stanford Research Institute from 1960-1970. The background to SWOT stemmed from the need to find out why corporate planning failed. The research was funded by the fortune 500 companies to find out what could be done about this failure. The Research Team were Marion Dosher, Dr Otis Benepe, Albert Humphrey, Robert Stewart, Birger Lie:

 

Any organisation undertaking strategic planning will at some point assess its own strengths and weaknesses. When combined with an inventory of opportunities and threats in the organisation's external environment, the organisation is effectively making a SWOT analysis, that is it is establishing its current position in light of its Strengths, Weaknesses, Opportunities and Threats.

While most of the analysis is subjective, the SWOT can provide

multiple benefits to the business. These benefits can include:

•Insight into where the business can focus to grow.

•Understand the industry structure by using a SWOT in the business

plan.

•Focus the advertising and marketing on areas that will give a

competitive advantage in the marketplace.

•The foresight to see looming threats and react proactively.

Applications and when to use it

 

A SWOT analysis can be used for:

•workshop sessions

•brainstorm meetings

•problem solving

•planning

•strategic planning

•product evaluation and competitor evaluation

•personal development planning and decision making

In case of a business organization a SWOT analysis can be used to assess:

•a company (its position in the market, commercial viability, etc)

•a method of sales distribution

•a product or brand

•a business idea

•a strategic option, such as entering a new market or launching a new

product

•a opportunity to make an acquisition

•a potential partnership

•changing a supplier

•outsourcing a service, activity or resource

•an investment opportunity

 

The SWOT model

 

A SWOT analysis process generates information that is helpful in matching an organisation or group's goals, programs, and capacities to the social environment in which it operates. The ‘SWOT' itself is only a data capture exercise. Its is a subjective assessment of data which is organized by the SWOT format into a logical order that helps understanding, presentation, discussion and decision-making.

 

There are four dimentions of the model namely Strengths,Weaknesses, Opportunities and Threates. The four dimensions are a useful extension of a basic two heading list of pro's and con's. The following explanation represents it in a better way.

 

Strengths:

Depict the positive tangible and intangible attributes, internal to an

organisation and within the organisation's control. These may include;

 

•Advantages of proposition?
•Capabilities?
•Competitive advantages?
•USP's (unique selling points)?
•Resources, Assets, People?

. Experience, knowledge, data?
•Financial reserves, likely returns?
•Marketing - reach, distribution, awareness?
•Innovative aspects?
•Location and geographical?
•Price, value, quality?
•Accreditations, qualifications, certifications?
•Processes, systems, IT, communications?
•Cultural, attitudinal, behavioural?
•Management cover, succession?

 

Weaknesses:

These narrate the internal factors within an organisation's control that detract from the organisation's ability to attain the desired goal. Which areas might the organisation improve?

 

These may include;

•Disadvantages of proposition?
•Gaps in capabilities?
•Lack of competitive strength?
•Reputation, presence and reach?
•Financials?

Own known vulnerabilities?
•Timescales, deadlines and pressures?
•Cashflow, start-up cash-drain?
•Continuity, supply chain robustness?
•Effects on core activities, distraction?
•Reliability of data, plan predictability?
•Morale, commitment, leadership?
•Accreditations, etc?
•Processes and systems, etc?
•Management cover, succession?

 

Opportunities:

These attributes forecast the external attractive factors that represent the reason for an organisation to exist and develop. What opportunities exist in the environment, which will propel the organisation? Identify them by their ‘time frames'.

These can be;

•Market developments?
•Competitors' vulnerabilities?
•Industry or lifestyle trends?
•Technology development and innovation?
•Global influences?

. New markets, vertical, horizontal?
•Niche target markets?
•Geographical, export, import?
•New USP's?
•Tactics - surprise, major contracts, etc?
•Business and product development?
•Information and research?
•Partnerships, agencies, distribution?
•Volumes, production, economies?
•Seasonal, weather, fashion influences?

 

Threats:

These reflect the external factors beyond the organisation's control which could place the organisation mission or operation at risk. The organisation may benefit by having contingency plans to address them if they should occur. It is required to classify them by their severity and probability of occurrence.

The threats may be in the following aspect:

•Legislation could impact.
•Environmental effects would favour larger competitors.
•Existing core business distribution risk.
•Market demand very seasonal.

. Retention of key staff critical.
•Could distract from core business.
•Possible negative publicity.
•Vulnerable to reactive attack by major competitors.

 

It is important to note the strengths and weaknesses are intrinsic value-creating skills or assets, or the lack of, relative to competitive forces.Opportunities and threats are external factors which are not created by the organisation, but emerge as a result of the competitive dynamics caused by future gaps in the market.

 

Positive factors

Internal factors

Negative

Or potential to be negative.

Strengths

Weaknesses

Opportunities Threats

External factors

 

Advantages of SWOT Analysis

 

SWOT Analysis is widely popular and applicable in case of any

venture only because of its advantages as it;

•Simple four box framework

. Facilitates an understanding of the strengths and weaknesses of the

organisation.

•Encourages the development of strategic thinking.

•Enables a management team to focus on strengths and build

opportunities.

•Can enable an organisation to anticipate future business threats and

take action to avoid or minimise their impact.

•Can enable an organisation to spot business opportunities and exploit

them fully.

•Flexible.

 

Disadvantages of SWOT Analysis

Though SWOT Analysis has a number of merits, still it suffers from

the following disadvantages:

•Some users over simplify the amount of data used for decisions – it is

easy to use scant data.

•To be effective this process needs to be undertaken on a regular basis.

•The best reviews require different people being involved each having

a different perspective.

•Access to quality internal data sources, this can be time consuming and politically difficult (especially in more complex organisations –parent company etc).

 

The pace of change makes it increasingly difficult to anticipate

developments that may affect an organisation in the future.

The risk of capturing too much data is that it may make it difficult to

see the wood for the trees and lead to ‘paralysis by analysis'.

The data used in the analysis may be based on assumptions that

subsequently prove to be unfounded (good and bad).

Lacks detailed structure – so easy to miss key-elements.

As far as identifying actions from SWOT issues is concerned, it all very much depends on the reasons and aims for using SWOT, and also the authority/ability to manage others, whom by implication of SWOT's breadth and depth, are likely to be involved in the agreement and delivery of actions.

 

 

 

CHAPTER: 3

 

SWOT ANALYSIS OF SUZLON ENERGY

 

The SWOT Analysis of Suzlon Energy is explained below through the four

indicators:

 

STRENGTHS OF SUZLON

 

1.Integrated business model

Suzlon Energy Ltd. Is having an integrated business model that they don't have to go to other suppliers for raw products. They have very good vertical integration for supporting there production activities. So they don't have to be dependent for supplies.

2.In house technology and design capabilities

They are having enough in-house technology development capabilities as they have skilled employees so that they can design their products of their own. They don't have to go to outsider experts for designing the products.

3.Market leadership in India and global presence

It is the only company of India which is having a global presence and as it is

a market leader it can have benefits of its brand image.

4. Prudent acquisitions and alliances

Suzlon has entered in to very prudent acquisition which is helping it for increasing its main strength of vertical integration as well as provides chance of global expansion also.

For example: It has acquired HANSEN which was the worlds second largest

manufacturer of gear boxes.

5. Global Production

As Suzlon has a global presence, it produces the products which can be used globally. Though it is not that much technically developed as compared to other global players, but its products can work at global level also.

6. Pricing Power

As Suzlon is the market leader in India, it can drive the price and others will follow it. But , it is now necessary for it to produce and sell at low cost and the production must be cost effective, because new global players are entering in to the market.

7.Diversified Product line

Suzlon is producing each type of wind turbines working in India. It has a wide range of products that has been sufficiently designed to cope with the specific conditions and to that give optimum results.

8. Sophisticated

and modernized research and development

facilities

9.Highly qualified and energetic work force

 

WEAKNESSES OF SUZLON

 

1. Operational Risk

Suzlon as a market leader don't have that much efficient operation management team. We can say this because there are many complaints of customers regarding their operating staffs who provide after sales service and it is also looking up to some extent in operating the business. So proper implementation of strategies is lacking.

2.Growth in Assets diminishing Growth in Profits

Since last few years, Suzlon has focused more on integration. So it has gone for acquisition and backward integration which blocks its investments in assets. Thus its growth rate of profits has declined. So, compared to growth in assets the growth in profits is low which is not favourable for the firm.

3.Unsupportive Stock Prices

When a company's stock price is more than its book value, it can be considered as a good sign for investors, but currently due to the unfavour market conditions Suzlon's stock prices has fallen below the book value,while other competitor's share prices has not declined below than their bookvalue.

4. Unfavourable Ratings

Before sometime, only Moody, a credit rating agency has down-graded Suzlon Energy Limited due to its financial weaknesses. They have also found the improper operation management at Suzlon.

5.Improper Working capital Management

Earlier Suzlon was a financially strong company. But the previous down-turn in the world economy has brought the company in a critical situation. And Suzlon is also facing this problem because of improper working capital management. Many experts also think that Suzlon has paid more for its HANSEN acquisition.

6.Weak Strategic Financial Management

Suzlon when expanded its business through RE Power, it has signed a

contract that Suzlon will pay 65 million Euro in December 2007, 30 million.

Euro in April 2009 and final payment of 175 million Euro will be paid in May 2009. It can be found out that the cost of acquisition is too high and it has been provided that Suzlon will arrange this payments from external sources as well as from working capital which directly affects companies performance domestically as well as globally. Such lacuna in appropriate and timely decision making in finance is the biggest weakness of Suzlon.

 

OPPORTUNITIES FOR SUZLON

1. Environmental Awareness

Now a days environmental awareness has been increased among the population of India. They have started saving energy and trying to reduce pollution. This factor is favourable for the wind power energy as its an option to thermal power, which is also responsible for polluting the environment. So wind energy is having benefit of no pollution as it produces pollution free wind energy. And Suzlon is the market leader in India in this sector which is the backup force for it. Therefore, there is a high growth opportunity for Suzlon in future horizon.

2. Government Initiatives

As government has also understood the importance of natural resources, the govt. is in favour for wind energy which uses wind and provide pollutionfree energy. Govt. of India is supporting firms those provide untraditional energy. As a part of this industry suzlon can gain advantage of govt.initiatives. Govt. is also providing tax exemption on their earnings and also providing subsidies for encouraging investment in backward areas of society to generate employment.

3.Untapped Offshore Market

Till now none of the Indian player other than Suzlon has gone for global expansion. So it can have advantage of covering untapped offshore market as an Indian player. Suzlon is also having strong financial backup compared to its competitors in Indian market.

4.Steady Growth in Demand

As awareness of wind energy is increasing and people understood the importance of renewable energy sources which is cost effective, this leads to steady growth in demand giving an opportunity to business more.

5.Vast coastlines of India and low cost

In India we have a vast coastal line which is very supportive to establish wind mills at lower cost. So this can be a favourable factor for this industry as well as will give an ample opportunity to Suzlon to extract more from this natural presence.

 

THREATES TO SUZLON

1. Intense Competition

The govt. of India has approved FDI limits up to 74%. This can be a favourable factor for the whole industry, but for Suzlon it is a threat. Though it is a market leader, its technology efficiency is not up to the mark as compared to global giants like VASTAS. So entry of global players will affect Suzlon a lot.

2.Foreign Exchange Risk

As Suzlon is having a global presence, there is default risk of exchange rate fluctuations. As the exchange rates are fluctuating highly since last couple of years, it has become more risky for Suzlon to do business globally.

3. Technology Risk

Earlier technology was not become obsolete so fast, but currently technological development is very fast and new technology is been introducing in to the market very fast. So the company has to implement the new developed technology to compete in the market where if is having more corporate customers who generally know the product very well before using it.

4.Objections to Wind Power

The main objection to wind power is due to other environmental costs.Many wind parks remain shut-down for a part of the year because of bird migration patterns and numerous turbine related bart-deaths. Furthermore,turbines take up lands; though larger turbines produce more power, they also take more land to operate safely and effectively, and since any man-made installation can have adverse effects on terrestrial ecosystems. Hardcore environmentalists may object to the installation of wind parks, lobbing the govt. to look for other sources of energy. Obviously, the oil and coal industries will lobby against govt. subsidization of clean energy sources.Basing on this industry, effective lobbying could greatly reduce the amount of government support given to the wind power industry.

 

 

CONCLUSION

 

From the above SWOT Analysis we can draw a conclusion that the Internal Strengths are sufficient to compensate the Weaknesses as well, but for this the management has to take effective and time bound actions. Though there are some threats that restrict its growth, they will not form a compound pressure on the development of the company. There is a sky of opportunities and it has to reach one by one by defeating the threats and by rooting out the weaknesses that if faces. In a nut-shell it can be said that to start a venture it requires a little patience and time, but what about a market leader who a have the experience of 15 years….!! Undoubtedly, there will be a day when the entire world will become happy without any pollution and harmful particles with much pleasure and prosperity and the royal-rod will be seen in the hands of…………..yes, SUZLON! !!!

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