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A CASE PRESENTATION ON L&T STRATEGY

FOUNDERS
L&T was founded in Bombay (Mumbai) by two Danish engineers.

Henning Holck Larsen (4.7.1907 - 27.7.2003)

Soren Kristian Toubro (27.02.1906 - 4.3.1982)

The Yellow used by L&T symbolizes wisdom, liberalism, hope, optimism, imagination, curiosity and high intellect. Yellow because it provides a happy balance between wisdom and optimism. Additionally it is supportive of expansion and diversification.

The unique yet simple configuration of L&T using the combination of yellow and black is a masterpiece of balance and harmony.

Company Profile
Type Industry Founded HeadquartersPublic Conglomerate Mumbai, India(1938) Mumbai, India

Area served-

Worldwide

Introduction
Larsen & Toubro (L&T) is a technology, engineering, construction

and manufacturing company. It is one of the largest and most


respected companies in India's private sector Seven decades of a strong, customer-focused approach and the continuous quest for world-class quality have enabled it to attain and sustain leadership in all its major lines of business

L&T has an international presence, with a global spread of offices.


A thrust on international business has seen overseas earnings grow significantly. It continues to grow its overseas manufacturing

footprint, with facilities in China and the Gulf region

Cont..
The company's businesses are supported by a wide marketing and

distribution network, and have established a reputation for strong


customer support.

L&T believes that progress must be achieved in harmony with the


environment. A commitment to community welfare and

environmental protection are an integral part of the corporate


vision.

75 YEARS OF L&T
Early Days

In 1938, the two friends decided to forgo the comforts of working in Europe, and started their own operation in India. Their first office in Mumbai (Bombay) was so small that only one of the partners could use the office at a time! In the early years, they represented Danish manufacturers of dairy equipment for a modest retainer. Germany's invasion of Denmark in 1940 stopped supplies of Danish products. Imports were restricted and they started a small work-shop to undertake jobs and provide service facilities.

Early Days
This crisis forced the partners to stand on their own feet and innovate. They started manufacturing dairy equipment indigenously. These products proved to be a success, and L&T came to be recognised as a reliable fabricator with high standards. The war-time need to repair and refit ships offered L&T an opportunity, and led to the formation of a new company, Hilda Ltd., to handle these operations. L&T also started two repair and fabrication shops - the Company had begun to expand.

THE JOURNEY
By 1944, the Company represented British manufacturers of equipment used to manufacture products such as hydrogenated oils, biscuits, soaps and glass.

In 1945, L&T signed an agreement with Caterpillar Tractor Company, USA, for marketing earthmoving equipment.

On 7th February 1946, Larsen & Toubro Private Limited was born.

In December 1950, L&T became a Public Company with a paid-up capital of Rs.2 million. The sales turnover in that year was Rs.10.9 million.

Prestigious orders executed by the Company during this period included the Amul Dairy at Anand and Blast Furnaces at Rourkela Steel Plant.

Cont..
Today, L&T is one of India's biggest & best known industrial organisations with a reputation for technological excellence, high quality of products & services, & strong customer orientation.

S. K. Toubro retired from active management in 1962.

The sixties were also a decade of rapid growth for the company: UTMAL (set up in 1960), Audco India Limited ( 1961), Eutectic Welding Alloys (1962) and TENGL (1963).

By 1973 had become one of the Top-25 Indian companies.

In 1976, HolckLarsen was awarded the Magsaysay Award in recognition of his contribution to India's industrial development. He retired as Chairman in 1978.

SECTORAL PRESENCE

BUSINESS STRUCTURE

ACHIEVEMENTS OF L&T
Built India's first indigenous hydrocracker reactor. Built the world's largest continuous catalyst regeneration reactor.

Built the world's biggest fluid catalytic cracking regenerator.


Built the world's longest product splitter. Built Asia's highest viaduct - Panvalnadi for the Konkan Railway. Built the world's longest LPG pipeline. Built the world's longest cross country conveyor.

FINANCIAL HIGHLIGHTS
Net Worth
Rs in Crore
30000
25000 20000 15000 10000 5000 0 2011-12 2010-11 2009-10

Profit after Tax


Rs in Crore
4500 4000 3500 3000 2500 2000 1500 1000 500 0

4413
3676 3185

25223
21846

18312

2011-12

2010-11

2009-10

VISION

MISSION
To compete and grow in a globalised business environment, L&T is implementing a strategic plan (Lakshya) for 2010-15. The plan has been drawn up in consultation with a leading international strategy consultant. It has set ambitious growth target for each business. Create long term value for the customers through superior product structuring by capitalizing on our knowledge pool.

CONGRUENCY BETWEEN VISION, MISSION AND CORE VALUES

Core Value: Performance Driven Vision: Attaining global benchmarks, constantly creating value, meeting expectations of employees, stakeholders and society, total customer satisfaction, enhancing shareholder value. Mission: To compete and grow, ambitious target setting for each sector

Cont..
Core value : Customer Focus & Mutual Respect Vision: Customer satisfaction, enhancing shareholder value, fostering a culture of caring, trust, meeting expectation of society, employees and shareholders Mission: Create long term value for our customer through superior product structuring, partnering our customer by offering solutions, deep understanding of Indian sector and full range of financial products.

Cont..
Core Value: Integrity Vision: Entrepreneurial and empowered team, professionally managed and committed, foster a culture of caring, trust (show uprightness and honesty as an important part of integrity). Mission: Capitalizing on our knowledge.

CORE COMPETENCY
These business offerings translate into the following core competencies: 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 manufacturingseveral modules simultaneously.

Cont..
Procurement : An extensive set of suppliers from around the globe, networked through an online procurement and an e-business platform. 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, hydroelectric power stations and irrigation structures in various countries.

A NATIONWIDE NETWORK
Manufacturing facilities in- 18 locations Offices in - 19 cities Management Development Centre Lonavala Knowledge City -Vadodara Logistic Advantages - Ability to optimize resources at various locations

GLOBAL PRESENCE

The company has manufacturing facilities in India, the Middle East, South East Asia, China and Australia. Customers include global majors in over 30 countries.

SUSTAINABILITY IN CHALLENGING TIMES


12 per cent of energy requirement is sourced from renewable energy. Several of L&Ts buildings are certified green buildings. 15 of their campuses have achieved zero wastewater discharge status.

Total water consumption reduced by 5 per cent by L&T units since 2009.
Natural material being replaced with crushed sand, fly ash and ground granulated blast furnace slag.

We have reduced carbon emission to less than 22,000 tonnes since 2008.

TQM CULTURE

TQM movemen t was initiated in L&T in 1993.

Large number of managers participated in Kaizen.

Cross functional teams regularly operate in the area of design, manufacturin g, marketing, services.

TQM awareness programmes have also been extended to stockiest and vendors.

TQM culture and ISO 9000 systems adopted by almost all divisions.

EXTERNAL ENVIRONMENT PEST ANALYSIS PORTERS 5 FORCES ANALYSIS INTERNAL ENVIRONMENT SWOT ANALYSIS

ANALYSIS
Strengths
Private sector housing boom & high demand of commercial building L&Ts experience in India Brand name of Larsen & Toubro An experienced employee base Diversified business group Strong financial results. Low cost skilled labour availability

Weakness
Slowdown in middle east Average experience employee age nearing retirement Huge attrition rate Low employee satisfaction Week Global Reach Training itself is a challenge. Lack of new products & services.

Opportunities
Major Infrastructure projects coming up (govt.) Renewable energy projects will bring more projects Financial support by Govt. & growth in income level of people Global economic recovery Investment in Defense sector

SWOT

Threats
Inflationary and cost pressures Threat of a global Financial Turmoil Vendor issues Government policies Competitors Taxation policies Lack of financial resources.

1. Threat
Low threat of new entrant due to Economies of scale Labour Intensity High Capital Requirement Lack of Knowledge and Experience Acess to input Access to maket

2. Suppliers Bargaining Power


High Bargaining power of supplier. Suppliers of construction materials are fragmented and are extremely critical for this industry since most of the construction work is outsourced. Proper supply chain management is a costly yet critical need.

3. Buyers Bargaining Power


The Bargaining power of buyer is low/moderate. Buyers in Engineering & construction sector have less choice due to limited number of players. The market forces havent empowered the buyers to a large extent.

4. Industry Rivalry
The industry rivalry is high. This instinct of the industry is primarily driven by the technical capabilities acquired over years of gestation under the technical collaboration with international players and the completion of project on time.

5. Substitute
There is no perfect substitute to this industry. It will be effected only when the country is fully developed than the company need to look forward towards the emerging economies

ANALYSIS
1. Political Factors
SEZ Act to Boost infrastructural Development.

Cement Prices Reduced for State Infrastructure Projects.


FDI Liberalization to Augment Industry Growth. REITs(Real Estate investment trusts) to Positively affect real Estate Business.

2. ECONOMIC FACTORS
Growth in Construction Activity Stimulating GDP Growth.

Rate Hikes Unlikely to Slow down Growth.

3. SOCIAL FACTORS
Shifting Consumption Pattern to Fuel industry Growth.

Rising Urbanization to Boost Industrial Growth.


Green Building in India

4. TECHNOLOGICAL FACTORS
Low Technology Adoption to Hinder Growth. Construction As Per Indian Requirements. Ready-Mix-Concrete being Experienced With.

5. ENVIORMENTAL FACTORS
Technological solutions helps in integrating the supply chain, hence reduce losses and increase profitability. With the entry of global companies into the Indian market, advanced technologies, are used in engineering & Construction. With the development or evolution of infrastructure sector, many of the MNC enter into Indian market. Infrastructure such as roads and bridges affect the many sector such as automobile sector etc.

Environmental situation affect the infrastructure sector.

6. LEGAL FACTORS Ensure a balanced transition to open trade at minimal risk to the Indian economy and local industry. Indian government infrastructure policy aimed at promoting an integrated, phased and conductive growth of the Indian infrastructure sector. Confirms the governments intention on harmonizing the regulatory standards with the rest of the world. Legal provisions relating to safety measures.

Business Strategy
The company was mainly into engineering, procurement and construction segments. It also has a large exposure to commodity businesses such as cement and ready-mix concrete. In the year 2000, L&T began implementing its business restructuring exercise with its first two five year plans. The restructuring plans had set a target to reach a business volume of Rs 35,000 crore annually which the company achieved and exceeded by 1520%. As per the restructuring plans.

L&T had divested its cement business in favour of the Aditya Birla Group and its ready-mix concrete business in favour of Lafarge SA. The third fiveyear plan of the company will be executed from 2010 to 2015.

GROWTH STRATEGY
L&T is concentrating on hi-tech areas, vacating non-remunerative product lines and focusing on the exports market. L&T developed technology for manufacturing critical equipment for process, nuclear and defence sectors.

It is also in talks with leading aircraft manufacturers in India and abroad for supplying components. Recently the company signed a joint venture with EADS Defence and Security, for defence electronics in India..

Risk Management Strategy


Doing business within India remains paramount. Vision is to become an Indian multinational not just another multinational. Investment made in the Middle East for training of workmen. Showing a long term commitment to consolidating presence in select geographies through setting up of offices, entering into alliance with collaborators, developing marketing networks, brand promotion and wherever feasible, setting up manufacturing facility. Institutionalised a risk management culture and framework in the Company.

Future Strategy
A blueprint for the next phase of growth till 2015, named Vision 2015, at Larsen and Toubro Ltd is being drafted. The first plan was devised by Boston Consulting Group, a leading global management consulting firm. L&Ts recent moves such as signing a slew of pacts with nuclear engineering firms such as Westinghouse of USA, Atomic Energy Commission of Canada and Russia's Atoms troy export for nuclear plants, an entry into nuclear equipment forging, defence shipbuilding and the latest joint venture make it clear that L&T is focusing more on its core competencies Its power business is also taking shape with 11 new factories making various parts of power equipment.

Its power business is also taking shape with 11 new factories making various parts of power equipment. It has put in place a nuclear equipment forging shop in Hazira in Gujarat at an investment of Rs1, 500 crore. As per plan, the company will create three operating companies to look after defence, aerospace and nuclear power sectors for effective operations.

MCKINSEYS 7S FRAMEWORK

Structure
Strategy System

Superordinate Goals

Skills
Staff

Style

MCKINSEYS 7S FRAMEWORK Style One of the seven levers which top management can use to bring about organization Change. With change of systems & procedures - style of functioning changes - Culture of organization changes Staff . Update knowledge & skills to keep pace with change Strategy Includes purpose, mission, objectives, goal, action plans & policies 7S model emphasize - Development easy execution.

Systems Procedures & methods framed by organization & followed by operational personnel in the respective functional area Traditional systems Change in view of advanced technology & processes developed.
Structure Relationship between/among various positions and activities Design of structure - critical task for top mgmt. Need based structural changes - to cope with specific strategic tasks without abandoning basic structural divisions throughout the organizations. Skills Acquainted with state of the art technology & improvised methods & practices.

Strategic Mantras Followed By L&T


Audacious in vision.

Focus on what know best.


Focus on achieving operational excellence. Good governance made the business sense. Innovate to create value for customers. Give back to the society the Indian edge.

Recommended Strategy
DTC is a cross-functional exercise requiring close coordination between sales, engineering, manufacturing, supply chain, quality and finance functions. The main driver for the same is product Target Cost. Addressing Design to Cost is a complex task due to need to manage several aspects as described below.

Development Strategy
L&T has established itself as a dominant player in the engineering and construction through infrastructure development.
The company has an international presence with a global spread of offices and joint ventures with world leaders. Develop leaders from within.

CONCLUSION
Ranked among 2009 'Leaders' in the prestigious Global 100 list by International Association of Outsourcing Professionals (IAOP), and a whollyowned subsidiary of US $ 9.8 billion Larsen & Toubro, India's leading engineering-to-financial services organization. Their new emerging verticals include Media & Entertainment and Life Sciences & Healthcare. Larsen & Toubro Infotech Ltd. (L&T Infotech), one of the fastest growing IT /Services companies, is ranked by NASSCOM among the top software & services exporters from India in 2009. Their other Service offerings are: Business Analytics, Legacy Modernization, Applications Outsourcing, Architecture Consulting, PLM and Service Oriented Architecture.