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Suzlon Report b12007 - Times New Roman

Suzlon Report b12007 - Times New Roman

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Published by Akash Tekchandani

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Published by: Akash Tekchandani on Nov 10, 2013
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Case Study
Akash Tekchandani B12007
Suzlon Energy Ltd: Making a Foray Abroad
Attractiveness of the Wind Energy Market
In Industrialized countries, such as USA and Germany, the demand for energy is increasing - the days of overcapacity in electricity production are coming to an end. Many older power plants (fossil fuel based) will soon reach the end of their working lives. It is estimated that over 1,500 GigaWatts of power generation capacity will need to be built in the Organization for Economic Co-operation and Development (OECD) countries alone. . By 2030, the world energy needs are estimated to be over 40% higher than in 2008. Current Estimates are that over 4,000 GigaWatts of new energy capacity needs to be installed before 2030, requiring investments of more than US$ 13 Tr. in the market. This sharp increase in world energy demand will require significant investment in the power sector to generate capacity and develop grid infrastructure, especially in emerging economies such as India, Brazil and China. In contrast to uncertainties of non renewable sources of fuel, wind energy is a mass indigenous power source -  perennially available in almost every country across the globe. Since there is no fuel costs and no supply dependence on imported fuels from politically unstable regions, it is  being taken up heavily in both developed and emerging nations. This makes this a
very attractive market
 to foray into. Currently, wind energy produces just over 1% of the global energy,  but it is estimated to touch 160 GW by 2010 and 240 GW by 2012. Further, Wind Energy is competitive and lucrative as long as an Oil Barrel Costs over $40 per barrel. In 2007, Oil cost over $55 a barrel and is expected to cross $100 a barrel by the year 2012. Wind power has the advantage that it can be deployed faster than other energy supply technologies. Even large offshore wind farms, which require a large detailed level of infrastructure and grid connection, can be installed from start to finish in less than two years. This is lesser than the much longer timescale for conventional power stations such as nuclear reactors. This has resulted in a number of developed countries adopting the same.
Oil Producing Countries in the World
23.7 17.9 16.1 8.4 6.3 3.3 2.9 2.6 2.5 2.3 13.9
Installed Capacity (in %)
Germany US Spain India China Denmark Italy France UK 0 20000 40000 60000 80000 100000 120000 140000 160000 180000
   1   9   9   7   1   9   9   8   1   9   9   9   2   0   0   0   2   0   0   1   2   0   0   2   2   0   0   3   2   0   0   4   2   0   0   5   2   0   0   6   2   0   0   7   2   0   0   8   E    2   0   0   9   E    2   0   1   0   E 
Total Wind Energy - Total Installed Capacity (MW)
 The Analysis of the holistic market performance of the firms results in a Matrix mapping Relative Market Share to Business Growth rate, which is as follows: Since the Global Wind Power Industry has an Annual Turnover of more than $23 Bn. and has been growing at an Annual Rate of more than 28% for the last 10 years, Suzlon can expect some competition. Further, competition is high in Europe- as
it accounts for over 65% of the total capacity. However, Suzlon’s foray into
Europe was hedged by its diversification in 21 countries, all over the globe. Hence, Suzlon can prepare itself by:- 1)
Innovating by investing heavily in Research and Development 2)
Vertical and Backward Integration
 Acquisitions 3)
Setting up Manufacturing units all across the globe, especially in growing markets such as North America and Taiwan. 4)
Continuing to keep up its value proposition of a low cost and high quality wind turbine provider Suzlon REPower Enercon Gmbh Goldwind Vestas Gamesa Corp Technology Suedwind
Porter's Five Forces Analysis
Threat of Substitutes Bargaining Power of Buyers Threat of New Entrants Bargaining Power of Suppliers
   B  u  s   i  n  e  s  s   G  r  o  w   t   h   R  a   t  e    L  o  w    H   i  g   h
High Low Market Share
Threat of Substitutes - HIGH
Fossil Fuels
 (75% of total Energy Market)
High Front-up Capital Investment Low Operational Capacity (40%) High Subsidies given by Governments
Power of Suppliers - HIGH
Steel constitutes 70% of total Manufacturing cost of a Turbine Current need for vertical integration to drive down costs  Niche technology leads to increased reliance on a few suppliers
Power of Buyers - LOW
Large number of Customers Highly Fragmented Market Large Switching Fixed Cost Green energy adoption increasing globally
Threat of New Entrants - LOW
Large number of Patents Globally
Large amount of Initial Capital Investment is required

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