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46,10 Internationalisation of Bharat
Forge Limited: a case study
Rajesh K. Pillania
1544 Management Development Institute, Sukhrali, Gurgaon, India and
Northumbria University, Newcastle upon Tyne, UK

Purpose – The purpose of this paper is to follow the internationalisation of an Indian company,
Bharat Forge Limited. It studies how a small company from India becomes one of the leading players
in the global forging industry.
Design/methodology/approach – This is a case study approach for studying the process of
internationalisation in one particular firm.
Findings – Bharat Forge Limited has followed the traditional stages model of internationalisation. It
started global foray with exports and continued with that for more than three decades before going for
acquisitions way. The company has gone for related-diversified using its strengths in technology to
diversify its products, markets and customers over the years and today has a global footprints in
terms of sales and manufacturing locations.
Practical implications – It shows the way for companies even small ones and from developing
countries, that how one can go for internationalisation and emerge as a leading global player.
Originality/value – India is one of the fastest emerging markets and there is growing interests in
Indian economy and Indian firms. But there are few case studies on internationalisation of Indian firms
and this study tries to fill that gap. Bharat Forge Limited is an Indian multinational company and has
become a leading player in global forging industry.
Keywords International business, Emerging markets, Exports, Globalization, India
Paper type Case study

Baba Kalayni, the Chairman-cum-Managing Director (CMD) of Bharat Forge Limited,

is in a reflective mood. Tomorrow, he is going to address the 47 Annual General
Meeting of the company. He is looking back at the progress of Bharat Forge Limited
over the years from a small domestic Indian company to an emerging market
multinational and one of the leading international players in global forging industry.
As he is looking back, his mind ponders over many issues. What motivated the
company to go for international markets? Has the recent strategy of inorganic growth
for internationalisation paid off? Was the de-risking strategy a critical foresight? How
is the company going to face recent challenges of domestic and international markets?
How to further realize the dream of “global leadership”?

An overview of forging industry

Forging is among one of the oldest and basic industries affecting the day-to-day life of
people. Forging is the process by which metal is heated and is shaped by plastic
deformation by application of pressure. It refines the grain structure, creates structural
Management Decision uniformity free from hidden internal defects and improves physical properties like
Vol. 46 No. 10, 2008
pp. 1544-1563 strength, ductility and toughness of metal. This makes forgings ideal for applications
q Emerald Group Publishing Limited
where reliability and safety are a concern. Forgings can be economically produced
DOI 10.1108/00251740810920038 from almost any size or shape and thus offer great design flexibility.
The key driver of demand of forgings is the automobile industry as about 65 percent Internationalisation
of the total forging production is utilized in this sector. Other industries that consume of Bharat Forge
forgings include the engineering industry, railways, defence, chemical process
industries, oil exploration, cement, steel industry, etc. Table I gives an overview of Limited
global forging Industry.

Industry performance
The Indian forging industry has emerged as a major contributor to the manufacturing
sector of the country in recent past. The Indian forging industry has been growing at a
compound annual growth rate (CAGR) of 29 percent from 2003 onwards, and on an
average exports contribute around 10-15 percent of the industry’s production as shown
in Table II. The capacity of the industry is estimated to be around 1.5 million tones and
the industry currently operates around 70 percent capacity utilization producing
around 1.0-1.2 million tones of forgings.
Riding on outsourcing and technological developments, India exported forgings
worth US$ 472 million in 2007-2008. The industry’s major markets are USA, Europe
and China. However, only about 30-35 manufacturing units are currently contributing
to exports directly. The industry is one of the leading industries, which have gone for
foreign acquisitions in Europe and USA because the auto ancillary industry in these
countries has been collapsing (AIFI, 2008).

Industry structure
The Indian forging industry is highly fragmented consisting of around 400 units and
out of those only 9-10 are large units. Table III gives comparative performance of seven
major forging companies. The SMEs form the backbone of the industry. The organized
sector accounts for about 65-70 percent of the total forging production in the country,
while unorganised players (who are mainly small and tiny units) cater mainly to job
work and the replacement market or tier 3 or tier 4 component manufacturers. The
unorganised sector caters mainly into Open Die Forging segment having lower capital
costs whereas the organized sector dominates the Closed Die Forging segment. Closed
Die Forging contributes 70 percent, Open Die Forging Die contributes 15 percent and
Precision Die Forging contributes rest 15 percent to total forgoing production in the
country. It has investment of US $ 700 million and provides employment to 200,000
directly and indirectly (AIFI, 2008). Historically the industry was labour intensive but
now it is becoming more capital intensive with opening up of the economy and

Product range
Indian forging industry makes a wide range of products, each being a diverse market
structure and technology requirement, meeting not only the needs of the country but
also supplying to global markets. The automotive industry is the main customer for
forgings. However, the industry’s efforts in upgrading technologies and diversifying
product range have enabled it to expand its base of customers to railways,
construction, petro-chemicals, power, diesel engines, aviation, defence, agriculture,
mining, oil and gas, industrial machinery, shipping, space etc.

Table I.

and employees
Global Production of

£ 1,000), no. of plants

Forgings (metric net tons
Euroforge USA Canada
Country forging types members Japan Mexico China India Australia Brazil Korea Taiwan World

1. Drop forging, press and upset forging

Production of forging industry
(subcontracting) 3.068 1.554 1.707 1.600 700 40 311 100 112 9.192
In-house production of the automotive
industry 373 398 400 0 3 103 1.277
In-house production of the finished
assembly subcontracting 299 5 80 384
Forged catalogue items (i.e. producers of
flanges and fittings, piping, connectors,
armatures, tools, machineries, etc . . .) 406 100 300 806
Total 4.146 1.952 1.707 2.100 700 345 314 100 295 11.659
2. Cold forging
Production of cold forging industry 307 125 297 80 20 25 854
In-house production of the final
consumer industries 79 79
Total 386 125 297 80 20 25 0 0 0
3. Open die forging (Total)
From it:
Ring rolling 438 289 200 190 2 9 1.128
Other open die forging(excluding forged
steel bar, blanks and railway rolling
stocks) 868 130 1.000 25 2.023
Total 1.306 419 371 1.200 190 27 0 0 9 3.522
4. Close die forging for non ferrous metal 80 45 50 20 20 215
Total production 5.918 2.541 2.378 3.400 930 397 314 100 304 16.282
Number of forge plants 619 360 355 1.000 330 26 100 20 60 2.870
Number of employees 78.344 14.882 33.000 100.000 38.000 1.800 23.431 5.000 4.000 298.457
September January September September August January
September 07 07 August 07 07 2006 07 0 Estimated 07
Notes: Euroforge members include Germany, Italy, France, Spain, United Kingdom, Belgium, Sweden, Czech Republic, Poland, Slovenia, Finland and Turkey
Source: Euroforge (2008)
Year Production (in ’000 tones) Export (million US$)
of Bharat Forge
2000-2001 435 90 Limited
2001-2002 382 110
2002-2003 440 145
2003-2004 600 178
2004-2005 732 250 1547
2005-2006 878 310
2006-2007 983 360
2007-2008 1,200 * 432 *
Table II.
Notes: *Excluding captive and tiny units; * closely estimated Performance of Indian
Source: Association of Indian Forging Industry (AIFI), 2008 forging industry

The industry is facing various challenges in domestic and export markets as shown in
Table IV. The Indian automobile sector in general and auto components sector is
particular has been on a spectacular growth trajectory over last 8-10 years (Pillania,
2008). Within the auto industry, commercial vehicles remain the mainstay of the
forging industry, with passenger cars still an important segment. The newer
generation cars will require better quality forgings. Looking at the overall long term
picture, the vehicle industry seems well poised to achieve a figure of 3 million
passenger cars by the year 2015. The estimates for the Indian Auto component
industry are US$ 30-40 billion by 2015 (Pillania, 2007). The growth is expected to be led
by exports which could be worth US$ 20-25 billion by 2015. Going by these estimates a
conservative estimate (15-20 percent) of the production of forgings by 2015 would be to
the tune of US$ 6 billion (AIFI, 2008).

Bharat Forge – an indian success story

Bharat Forge Ltd, the flagship company of the US $ 2.4 billion Kalyani Group, is a
leading global “full service supplier” of forged and machined – engine and chassis
components. Kalyani group is one of the leading industrial houses in India, having
diverse business interests in engineering steel, forgings, automotive components,
non-conventional energy and specialty chemicals. Bharat Forge Limited is the largest
exporter of automotive components from India; leading chassis component
manufacturer in the world; and, the second largest auto forging company after
ThyssenKrupp of Germany. Starting from a small city of Pune in western India in
1961, today it is a global firm with footprints across the triad-North America, Europe
and Asia-in terms of sales and facilities. Around three-fourths of its sales comes out of
India and it has manufacturing facilities spread across six countries and 12 locations –
four in India, three in Germany, one each in Sweden, Scotland, USA and two in China.
It owns the largest single-location forging plant in Asia and globally the largest plant
for manufacturing axles. It has made rapid strides in global markets as shown in
Table V and Table VI.
The company manufactures a wide range of safety and critical components for
passenger cars, SUV’s, light, medium and heavy commercial vehicles, tractors and
diesel engines. The company has also moved into non-automotive business and
manufactures specialized components for the aerospace, power, energy, oil and gas, rail


Table III.
performance of seven
major forging companies
Full year (Rs Cr.)
Company name Year end Equity Gr. Blk Sales NP NP Var% Div% B.V Rs CPS Rs. EPS Rs.

Ahmednagar Forg. 200806 34.92 393.92 661.16 63.44 2 3.00 0.00 118.40 23.80 18.20
Amforge Inds. 200803 2.96 26.02 50.79 2 1.84 0.00 0.00 25.90 0.00 0.00
Bharat Forge 200803 44.53 2,029.64 2,141.83 252.50 3.00 175.00 66.20 17.00 10.70
Kalyani Forge 200803 3.64 111.75 190.48 9.42 2 15.00 22.00 196.60 48.80 25.90
M M Forgings 200803 6.04 212.06 190.91 14.79 5.00 50.00 144.80 53.70 23.60
Mahindra Forging 200803 80.26 247.77 214.13 3.71 122.00 0.00 96.60 1.90 0.50
Patheja Forgings 199709 26.00 338.04 390.61 2 153.58 0.00 0.00 22.20 0.00 0.00
Source: Capital line Database, 2008
Domestic/Foreign market Major challenges
of Bharat Forge
Domestic market Volatile international and domestic prices of inputs Limited
Compliance with stringent environment norms
Practical difficulties associated with consolidation of
High attrition rate, at all levels 1549
High interest rates
Exports market Impact of a rising rupee on export realization
Reluctance of suppliers and end users to compensate
for increasing costs
Inadequate investment in technology up gradation,
due to high costs of capital
Cost competitiveness adversely affected due to
constant cost escalation without adequate
compensation coupled with the impact of a rising Table IV.
rupee Major challenges/key
issues faced by the
Source: Association of Indian Forging Industry (AIFI), 2008 forging industry in India

and marine, mining and construction equipment, and other industries. With a global
forging capacity of over 700,000 TPA, it is producing complex large volume parts in
both steel and aluminium. It undertakes Close Die Forging, Open Die Forging and
Machining It has over 7000 global employees. Backed by a full service supply
capability and dual-shore manufacturing model, Bharat Forge provides end-to-end
solutions from product conceptualisation to designing and finally manufacturing,
testing and validation (BFL web site, 2008).
The company has won many laurels along its journey of internationalisation. BFL is
a recipient of several national and international honours, recognition and awards:
Forbes Magazine has listed it for consecutive three years in its global “Best under
a Billion” list.
Automotive Component Manufacturers Association of India (ACMA) has
honored it over past four years for its export excellence.
BFL has also been awarded the Indo German Chamber of Commerce (IGCC)
Award for “Outstanding Contribution towards Promotion of the Indo-German
Economic Relations for the Year 2005”.
Bharat Forge received GKD-NIQR award for “Outstanding Organization” on 23
April 2005.
Outlook recognized BFL as the Best Value Creator for 2004 among large
companies (Source: BFL web site, 2008).

A global company with global presence

From a small Indian firm focused on Indian market, BFL limited has come a long way.
For past several years, exports have consistently contributed more than 40 percent of
sales and in 2008 74 percent of consolidated revenues are from sales outside India. The
geographic spread of revenues global as shown in Table VII.


Table V.

overview (Rs crores)

Bharat Forge financial
Year/Performance 200803 200703 200603 200503 200403 200303 200203 200103 200003 199903

Gross sales 2,314.37 1,990.84 1,651.44 1,258.63 866.92 648.01 459.02 525.35 558 450.95
Net sales 2,141.83 1,835.04 1,530.52 1,167.06 796.67 597.14 410.41 468.52 496.22 404.58
Other income 173.49 110.49 100.17 59.24 54.28 47.49 24.03 19.44 27.28 35.81
Value of output 2,162.47 1,857.51 1,560 1,194.83 793.88 628.34 408.49 461.95 512.5 402.76
Cost of production 1,667.54 1,396.5 1,167.11 851.06 571.52 450.33 316.88 356.92 382.17 325.11
Selling cost 67.15 45.9 41.98 37.67 24.31 16.81 5.61 5.17 0.35 0.4
PBIDT 640.91 541.22 442.23 333.99 259.14 195.68 119.49 132.71 133.39 113.29
PBDT 535.92 459.11 387.44 300.43 226.78 154.85 74.12 75.41 89.16 70.84
PBIT 501.97 441.42 369.19 281.43 213.37 153.92 79.77 93.02 103.52 84.16
PBT 396.98 359.31 314.4 247.87 181.01 113.09 34. 35.72 59.29 41.71
PAT 273.59 240.95 206.97 161.63 124.91 81.09 21.29 32.65 49.29 37.32
CP 412.53 340.75 280.01 214.19 170.68 122.85 61.01 72.34 79.16 66.45
Revenue earnings in forex 1,067.24 836.1 718.75 534.86 346.49 282.4 116.05 94.1 121.39 78.42
Revenue expenses in forex 178.25 179.48 137.55 65.28 49.61 45.8 17.61 33.41 38.12 32.16
Capital earnings in forex 0 0 0 0 0 0 0 0 0 0
Capital expenses in forex 162.67 82.48 223.46 114.98 37.9 23.43 0.32 8.57 60.9 14.11
Book value (unit curr) 66.16 59.13 51.92 106.81 58.72 37.57 41.45 36.86 103.83 108.34
Market Capitalisation 5,952.55 7,012.36 9,886.79 5,457.68 2,764.02 908.09 402.42 308.79 547.3 301.44
CEPS (annualised) (unit curr) 17.89 14.66 12.12 51.61 43.14 31.02 15.85 18.52 20.24 17.24
EPS (annualised) (unit curr) 11.65 10.18 8.83 38.32 31 19.94 5.31 7.99 12.31 9.51
Dividend (annualised %) 175 175 150 125 100 60 35 30 50 40
Payout (%) 30.03 34.36 34.03 35.61 32.25 30.08 65.87 37.55 40.59 42.07
Cash flow from operating activities 345.63 295.77 218.24 137.26 222.95 167.53 142.38 209.91 201.93 164.38
Cash flow from investing activities 2 618.75 2238.62 2680.5 2270.84 2 114.76 2 48.97 254.04 156.51 2142.08 2 59.01
Cash flow from financing activities 2 298.17 173.71 939.54 153.11 2 122.93 2 104.53 281.91 2379.14 249.37 2 120.61
Notes: 1 Crore ¼ 10 million; INR ¼ Indian National Rupee (43 INR ¼ US $1 at end of 2006)
Source: Capitaline Plus data base, 2008
Years/Rate of growth 200803 200703 200603 200503 200403 200303 200203 200103 200003 199903

Net worth (%) 11.88 14.09 173.13 91 56.28 2 9.35 12.43 264.5 24.16 4.86
Capital employed (%) 1.19 26.52 150.64 60.29 8.41 2 11.33 2 0.61 230.68 0.81 2 5.58
Gross block (%) 16.98 37.15 33.34 15.43 6.79 8.85 11.19 2 6.05 44.07 33.87
Gross sales (%) 16.25 20.55 31.21 45.18 33.78 41.17 2 12.63 2 5.85 23.74 2 23.05
Net sales (%) 16.72 19.9 31.14 46.49 33.41 45.5 2 12.4 2 5.58 22.65 2 23.91
Cost of production (%) 20.13 18.59 36.66 54.93 21.68 49.76 2 10.2 2 8.75 19.9 2 19.54
Total assets (%) 6.73 19.21 92.07 48.17 27.71 16.24 2.52 228.96 5.28 2 2.54
PBIDT (%) 18.42 22.38 32.41 28.88 32.43 63.76 2 9.96 2 0.51 17.74 2.8
PBDT (%) 16.73 18.5 28.96 32.48 46.45 108.92 2 1.71 215.42 25.86 8.05
PBIT (%) 13.72 19.56 31.18 31.9 38.62 92.95 2 14.24 210.14 23 2 2.76
PBT (%) 10.48 14.28 26.84 36.94 60.06 228.75 2 3.7 239.75 42.15 2 0.48
PAT (%) 13.55 16.42 28.05 29.4 54.04 280.88 2 34.79 233.76 32.07 3.07
CP (%) 21.07 21.69 30.73 25.49 38.93 101.36 2 15.66 2 8.62 19.13 11.01
Revenue earnings in forex (%) 27.65 16.33 34.38 54.37 22.69 143.34 23.33 222.48 54.79 2 16.6
Revenue expenses in forex (%) 20.69 30.48 110.71 31.59 8.32 160.08 2 47.29 212.36 18.53 2 39.64
Market capitalisation (%) 2 15.11 2 29.07 81.15 97.45 204.38 125.66 30.32 243.58 81.56 2.24
Source: Capitaline Plus data base, 2008

Bharat Forge growth

of Bharat Forge


Table VI.
MD The geographic spread in actual sales in rupees is shown in Table VIII. The sales have
46,10 grown by 17.8 percent for year 2007-2008 which has been a challenging year for due to
currency appreciation, significant slowdown in key markets, and increasing fuel and
steel prices.
Bharat Forge Limited today has manufacturing facilities spread across six
countries and 12 locations – four in India, three in Germany, one each in Sweden,
1552 Scotland, USA and two in China. It has a global presence with foot prints in each of
triad region i.e. North America, Western Europe and Asia. This is highlighted in
Figure 1.
Bharat Forge Limited has more than 35 OEM and Tier 1 customers, which include
the top five passenger car and top five commercial vehicle manufacturers in the world.
It has a diversified product portfolio as shown in Table IX.
In 2000-2001, chassis components for commercial vehicles in India was the major
product for the company, which by 2008 contributes only 35 percent to total sales as
shown in Table X. Now it is targeting to have more than 40 percent of business in
non-automotive segment by 2011-2012.
Mr B.N. Kalyani, an MIT graduate in engineering, is the CMD of the company and
the management team is shown in the list below, the organisational structure is shown
in Figure 2.
Chairman & Managing Director – Mr B.N. Kalyani.
Dy. Managing Director – Mr GK Agarwal.
Executive Director – Mr Amit Kalyani.
. Executive Director – Mr Praveen Maheshwari.
Executive Director – Mr Subodh Tandale.
Executive Director – Mr B.P. Kalyani.

Geographic Region Contribution to total sales (percentage)

Europe 49
India 26
North America 17
Asia Pacific (excluding India) 8
Total 100
Table VII.
Geographic spread (2008) Source: BFL Annual Report, 2008

Sales (Rs million)

Geographic region 2007 2008 Growth (%)

Europe 2,366 4,299 81.7

India 11,131 12,355 11.1
USA 4,910 4,855 (21.1)
Asia Pacific (excluding India) 237 456 92.4
Total 18,644 21,965 17.8
Table VIII.
Geographic spread Source: BFL web site, 2008
of Bharat Forge


Figure 1.
Global presence

Executive Director – Mr Sunil K. Chaturvedi.
Non-Executive Director – Mr Prakash C. Bhalerao.
Senior Vice President, Chief Compliance Officer, Company Secretary – Mr Beejal

The triggers for internationalisation

There are various reasons for firms to go for internationalisation. Though Bharat
Forge Limited started in 1961, but the company’s real journey to become a global
player began in 1997. Three factors determined the need to go global.
First, we appreciated what globalisation could do in improving quality, delivery,
costs, supply chain, R&D, productivity and business processes. We therefore, wanted
to venture out and learn best practices.
Second, while we had sufficient faith in domestic demand, we wanted to grow
beyond the Indian market.
Third, we recognized that different geographies often follow separate business
cycles. We wanted to not only reduce our over dependence on single market but also
take advantage of differential growth opportunities across varying geographies
(Annual report, 2003-2004). Thus learning opportunities, growth aspirations and
de-risking were the major triggers for internationalisation of BFL. Further, the
aspirations of MIT graduated CMD for going global provided the continuous support
and guidance for fighting it out in highly competitive international markets.

Internationalisation journey
Bharat Forge Limited started its international journey with execution of maiden export
order to Greece in 1972. It followed the export mode of internationalisation for over
three decades as shown in Table XI. The 1985 entry into erstwhile USSR provided a
stable export market in USSR but the US and Western European market was difficult
Automotive Non-automotive
Crankshafts (forged and machined) High technology, highly engineered critical and
Front axle beams (forged and machined) safety forged and machined components such as
Pistons (forged) large crankshafts for marine and power, landing
Steering knuckles (forged and machined) gear, engine and structural parts for aircrafts and
1554 Steering knuckles (steel and aluminium) helicopters, connecting rods for locomotives and
Connecting rods (forged and machined) equalizer bars and spindles and other heavy
Camshafts (forged) products for construction equipment
Rocker arms (forged) Forged and machined components such as gate
Control arms (steel and aluminium) Valves, wellheads, etc. for oilfield industries
Steering arms (forged and machined) Oil and gas
Spindles Gate valve bodies, bonnets, chokes, wellheads, shells
Wheel carriers and plugs
Piston crowns Shaped forgings for both surface and subsea
Marine and power generation
Engine components like crankshafts, connecting
rods, propeller shafts
Energy sector – windmill
Main shafts, sun gear shaft – gear boxes, spur gears
– gear boxes
Engine components, structural components, landing
Engine components like crankshafts, connecting
Ground engaging tips
Engine components like crankshafts, connecting
rods, pistons
Signaling equipment, axle components
Table IX.
Product portfolio Source: BFL Annual Report, 2008

Product Contribution to total sales (percentage)

Commercial vehicle chassis 35

Passenger vehicle parts 22
Desigel engine parts 25
Non-automotive business 18
Total 100
Table X.
BFL product mix (2008) Source: BFL Annual Report, 2008

to crack. The first big break came from Rockwell International, a partner in one of
group companies in the parent Kalayani Group.
Starting 2004 it moved ahead with inorganic growth path with acquisitions. In
January 2004 BFL acquired Carl Dan Peddinghaus (CDP), the 2nd largest forging
company in Germany that is mainly engaged in the manufacture of passenger car
of Bharat Forge


Figure 2.
Organisational structure

components. The company was renamed CDP Bharat Forge. The company was turned
around by 2005. This acquisition made BFL the second largest forging company in the
In October 2004 acquired another Germany company CDP Aluminiumtechnik, a
manufacturer of forged aluminium components for hi-end customers like BMW, Audi,
Volkswagen, Ford and others. The company is now renamed as Bharat Forge – AT.
Aluminium is progressively becoming the preferred material for specialized
automotive applications due to its significantly lighter weight that translates into
better fuel efficiency. While Bharat Forge already had a strong market presence in steel
forgings for commercial vehicles and passenger cars, the new acquisition will
contribute in widening the product offering and enable it to provide customers with a
larger bouquet of steel and aluminium components from a single source.
In 2005, BFL acquired Federal Forge now known as Bharat Forge America Inc.,
which provided BFL with a manufacturing presence in USA – one of its largest
markets. This was followed by the acquisition of Imatra Kilsta, AB, Sweden along with
its wholly owned subsidiary Scottish Stampings, Scotland (together called as Imatra
Forging Group).
In December 2005 Bharat Forge signed a JV with FAW Corporation – the largest
automotive group in China. Through this JV, BFL made a powerful entry into the large
and fast growing Chinese automotive market. The Forging Company of the FAW
group is the largest in China, and by joining hands with them, BFL instantly became
the largest forging company in China.
Year Milestones in International Journey of BFL
1972 Execution of maiden export order to Greece
1985 Entry in the erstwhile USSR market by winning a large contract for under
carriage components
1990-1991 Major breakthrough in the developed markets of Japan, USA and UK for the
1556 critical suspension and engine components like front axle beams and machined
1991 Implementation of a large US $ 50 million forging facility up-gradation
programme by commissioning of 16,000 MT’s and 6,000 MT’s Weingarten
(Germany) make of screw press lines
2000 Implementation of a US $ 30 million forging facility expansion programme by
commissioning of second 16,000 MT’s Weingarten (Germany) make screw and
2,500 MT’s mechanical press lines
2002 Major breakthrough in exports by catching Toyota for supplying small forgings
for its global and Indian operations
Exports of front axle components of trucks to Renault Vehicle Industries, the
second largest truck manufacturers in Europe
2003 Successful entry into US passenger car markets by exports to Ford Motors and
Daimler Chrysler
2004 Acquired Carl Dan Peddinghaus GmbH & Co. KG (CDP), one of the largest
German Forging Companies with plants in Ennepetal and Daun
Acquired CDP Aluminiumtechnik now known as Bharat Forge
Aluminiumtechnik. Provided an entry into the hi-end and fast growing
aluminium component business
2005 Acquired Federal Forge now known as Bharat Forge America Inc. Provided BFL
with a manufacturing presence in USA – one of its largest markets
Acquired Imatra Kilsta, AB, Sweden along with its wholly owned subsidiary
Scottish Stampings, Scotland (together called as Imatra Forging Group)
Table XI. Signed a JV with FAW Corporation – the largest automotive group in China. JV
Major milestones in named FAW Bharat Forge
international journey of
BFL Source: BFL web site, 2008

BFL global acquisition strategy comprised two key elements. The first is to widen and
broaden the company’s customer base by bringing in a wider portfolio of product
offerings to a larger group of customers. And, second, to have global facilities that
enable us to work with OEMs as an engineering and development partner. The
strategy, therefore, focused on acquiring such companies that had product
complementarities and manufacturing facilities, which were synergistic and could be
leveraged for cost effective and flexible production systems (BFL, 2006).
Thus Bharat Forge Limited has used exports, acquisitions and recently joint
venture in its internationalisation journey. It has used two-part strategy, the first being
expanding its capacity in India, which was used for supporting exports and the second
of acquisitions path.

Integration success
Merger and acquisitions has a poor success rate. Most acquisitions and alliances fail. A
few may succeed, but acquisitions, on average, either destroy or don’t add shareholder
value (Dyer et al., 2004). However BFL has been able to create value out of acquisitions.
The company has used a two-stage policy for integration. In the first phase, the Internationalisation
company focused on alignment of the acquired company with BFL in the first six to of Bharat Forge
eight months after each acquisition. In the second phase focus was on alignment in all
the business processes. The firm has derivative manufacturing council, global Limited
innovation council and common marketing organization where global best practices
are shared. All of the acquired companies except Sweden were making losses when
BFL acquired them. Now all of these are making profits (Anand, 2007). 1557
I am happy to inform you that we have laid a lot of emphasis on the integration between
Bharat Forge and its global operations. The objective was to bring people from across the
world together and create a common understanding of the goals and objectives of our
company, and help build strong working relationships to enable quick implementation of our
strategic plans (Baba Kalayni, CMD (BFL, 2005)).

Growig focus on non-automotive sector

Bharat Forge Limited has developed technology, engineering and manufacturing
capabilities in over the years. To leverage that, the company is focusing on high value
added niche business in the non-automotive areas like energy, power, aerospace, oil
and gas exploration, mining and metals, rail and marine which are seeing steady
demand growth and capital investments globally. These sectors, on a global basis,
need critical components in forged and machined condition. These are high value, high
value added components.
BFL has the unique advantage of having the domain knowledge, technology and resources to
manufacture these products. We have also developed relationships with key global customers
in these fields. Keeping all these factors in view, your company is taking effective steps to
establish a strong global presence in these businesses in the next 3 to 4 years. This would be
achieved through a judicious combination of organic and inorganic growth. Your company is
planning a capital outlay of close to Rs.350 crores over the next three to four years and is
targeting an incremental global revenue of close to Rs.1,000 crores (Kalayni, CMD (BFL,

Organizational philosophy, vision and strategy

The organizational philosophy, vision and strategy of Bharat Forge Ltd are shown in
the list below:
The Philosophy. To use our specialized skills and innovative technology to
contribute to the welfare of society. It is our intention to grow along with our
employees and to aid and encourage them to participate in our goals in order that
they realize their full potential. Our prosperity is linked to the prosperity of our
customers (Baba Kalayni, BFL web site, 2008).
Vision. To be the no. 1 forging company in the world by 2008.
Strategy. In expanding global markets, technology based innovation is the most
important driver of growth. We have been building world class manufacturing
plants and reaching global scale capacities in our line of businesses. We are
permanently extending our partnerships with major global OEMs and Tier I
companies around the world, offering our support as full service supplier.
Innovation runs through everything that we do. Our task is to move fast in the
MD direction set by our highly focused strategies. We believe that fast execution of
46,10 our strategies imparts tremendous velocity for us, and our customer’s progress.

It has put in efforts for developing strategy and making it relevant with the changing
scenario. It has progressed from the beginning made in 1997 with help from Tata
Strategic Management Group, to global leadership and recent focus towards
1558 innovation.
In 1997, BFL worked with the Tata Strategic Management Group (TSMG) to draw
up a five-year strategic plan. The objectives were to grow the business aggressively by
accessing global markets; to be among the top three global players in the chosen
industry segment; to set global industry benchmarks in cost, quality, technology,
speed-to-market and customer service; and to create sustainable competitive
advantage by taking strategic initiatives in areas of marketing, technology and
product development, operations and human resources.
With increasing success in the twenty-first century in international markets, BFL
focused on creating a position of global leadership in engine and chassis components
for passenger and commercial vehicles and has embarked upon a three-pronged
strategy to offer customers dual-shore design capability, dual shore forging
manufacturing capability, and dual-shore machining capability. That means offering
these facilities from different centres, whichever is the most appropriate in each
individual case. It has also set up a centre of excellence in Germany with a specific
focus on frontline product development capability and participation in the product
development initiatives of customers (Thomas, 2006). Recently BFL has recently
unveiled a new identity with focus on innovation.

Key elements of Bharat Forge strategy

De-risking business model
De-risking has been at the core of BFL business strategy. The company followed this
strategy to diversify markets, products and customers to develop resilience and avoid
being overly sensitive to any product, industry, geography or customer. It started
exports and than diversified the geographic scope and toady more than seventy
percent of the revenue comes from international markets. It has diversified its product
portfolio, manufacturing base, and customer base over the years. In 2000-2001, chassis
components for commercial vehicles in India, was the major product for the company,
which by 2008 contributes only 35 percent to total sales. Now it is targeting to have
more than 40 percent of business in non-automotive segment by 2011-2012. BFL is
upbeat about opportunities in power and aerospace (Reuters, 2008).
The de-risking has paid off over the years:
The year 2007-2008 has been a challenging year for BFL due to currency appreciation,
significant slowdown in key markets, and increasing fuel and steel prices. The strategies that
we have followed in past ten years have resulted in significant de-risking of our business and
have contributed towards your company successfully addressing all these challenges
(Kalayani, CMD (Moneycontrol, 2008)).

Dual shore model

Global automobile industry is the major buyer of forging industry. The industry has
been going through tough times and resorted to increasing outsourcing to reduce costs
as well as sharing responsibilities through supply chain integration for better sharing Internationalisation
and minimization of risks among supply chain partners. of Bharat Forge
“Dual shore” concept revolves around establishing more than one manufacturing
location for all core components. It involves best of both worlds by having one close to Limited
the customer for working closely with the OEM/Tier 1 for design/development and
another at a low cost location like India for taking cost advantage. BFL today has a
design and engineering and forging manufacturing capability for all its core products 1559
at least at two locations and in most cases more than two locations as shown in
Figure 3.

Customer relationships
Today the company has a big customer base and almost all the big OEMs and Tier-I
firms are in the customer list. The company has put efforts for developing customer
relationships and moved from a supplier to development partner and full service
provider for customers from design to delivery of finished products. The company has
focused on building strong design and engineering capabilities to each of its global
locations to respond to the global customers’ preference for suppliers having such
facilities close to their product development facilities.
Fortunately for your company, we have strong and durable relationships with all our
customers, both domestic and international. Our contracts with them have pass through
clauses, which enable us to recover steel price increases. Transparency coupled with mutual
trust and confidence with customers has therefore, enabled us to minimize the impact of
higher input costs on performance (Kalayani, CMD (Moneycontrol, 2008)).

Scale and low cost

BFL has the world’s largest forging capacity of over 700,000 tones per annum. It is
engaged in investing in state-of-the-art capacities to meet significantly higher and
growing demand for its products. These are under execution at Mundhwa, at Baramati
and in China.

Figure 3.
Dual shore manufacturing
MD BFL has been able to bring operation efficiency among the units it has acquired
internationally. We have always given concerted attention to costs and productivity. I can
46,10 assure you that however large we are, we will always be concerned about productivity,
throughputs and costs. It is part of our DNA. We could build scale and created an
environment to share best practices across the organization through flexible product lines.
We now have the capability to manufacture large volumes of forged and value-added
machined products. We have further been able to enhance growth in rated capacities by
1560 sharing best-in-class shop floor practices within our group companies which have resulted in
increases in productivity and throughput (Kalayani, CMD (BFL, 2008)).

Full service supplier capability

Over the years, Bharat Forge has been investing in creating state-of-the-art facilities,
world-class capacities and capabilities. The facilities include, fully automated forging
and machining lines, the largest of its kind and comparable to the best in the industry.
Bharat Forge has built up a strong capability in design and engineering, including a
full fledged product testing and validation facility, which gives Bharat Forge a full
service supply capability – from product conceptualisation to designing to
manufacturing and product testing and validation. Today, Bharat Forge has
transformed itself from being a mere supplier of automotive components to becoming a
preferred technology and engineering driven development partner, thus providing
more value to its customers. It has various certifications like ISO/TS 16949:2002; ISO
9001:2000; ISO 14001; API-6A; and AS 9100 (under certification).
Bharat Forge has always been a strong technology driven company. I believe that our
technology backbone is one of our key sources of competitiveness. We are committed to
continuously strengthen our technical skills and capabilities and to invest in infrastructure
that would enable us to maintain our lead on this crucial parameter. This would be in
manufacturing, operations and all other areas. Technology leadership in manufacturing,
operations and all other areas will always remain a top priority at Bharat Forge and I am
personally directing our work in this critical area (Kalayani, CMD (BFL, 2008)).

A lot of interest has been there in internationalisation process since long in
international business research (Berkema and Drogendijk, 2007). Internationalisation
is a topic at the core of the international business field, as most questions dealt with in
international business research emerge as a consequence of the interaction between the
firm and the different locations (Hutzschenreuter et al., 2007). There are two broad
approaches to internationalisation namely, the traditional stages approach and the
more recent born global approach (Pillania, 2009).
Firms embody disadvantages in competing with indigenous firms in foreign
markets and therefore internationalisation is about overcoming the inherent
disadvantage of liability of foreignness (Hymer, 1960, 1968; Hutzschenreuter et al.,
2007; Pillania, 2009).The famous Uppasala model (Johnson and Vahlne, 1977, 1990)
suggests that companies internationalise in small, incremental steps and the
internationalisation of the firm should be interpreted as an incremental learning
process (Cyert and March, 1963; Berkema and Drogendijk, 2007; Hutzschenreuter et al.,
2007). The liability of foreignness and information asymmetry were the major reasons
for firms to follow the traditional and more widely accepted stages model of Internationalisation
internationalisation (Pillania, 2009). of Bharat Forge
However, starting with the McKinensey findings of 1993 in Australia, born global is
an alternate approach which has gained some more support from similar studies in Limited
Europe. Born global firms go to international markets soon after their operations and
go at a fast speed (McKinsey, 1993; Rasmussen and Madsen, 2002; Pillania, 2009).
In the case under study, Bharat Forge Limited has followed the traditional stages 1561
approach for internationalisation. It started global foray with exports and continued
with that for more than three decades before going for acquisitions way. Based on the
accumulated leanings and resources, it has gone further in the internationalisation
Further, in international business strategy, there has been considerable debate and
questions on global strategy, both for (Hamel and Prahalad, 1985; Govindarajan and
Gupta, 2001; Yip, 2002) and against global strategy (Rugman, 2000; Rugman and
Brain, 2003; Ghemawat, 2001, 2003). Even by the recent empirical evidence and view
that a global firm with global strategy must have a reasonable (at least 20 percent) of
sales coming from each of the three triad regions of North America, Europe and Asia
(Rugman, 2003), Bharat Forge Limited has become a global firm with global strategy.

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Further reading
Google Finance (2008), “Bharat Forge Limited”, Google Finance Online, available at: http:// ¼ BOM:500493 (accessed 12 August 2008).
Levitt, T. (1983), “The globalization of markets”, Harvard Business Review, Vol. 61 No. 5, Internationalisation
pp. 92-102.
Mukherji, S. and Ramachandran, J. (2005), “Bharat Forge Limited: forging leadership”, case
of Bharat Forge
study, Indian Institute of Management, Bangalore. Limited

About the author

Rajesh K. Pillania is a prolific researcher with more than 70 papers in international/national 1563
journals and conferences. His areas of expertise are International Business & Emerging Markets,
Strategy & Competitiveness, Innovations & Knowledge Management. He is an advisory/editorial
board member of more than 40 international research journals, 30 international conferences and
professional bodies consisting of leading international academicians/industry leaders/policy
makers. He is a sought after guest editor for special issues by number of international journals.
Professor Pillania academic experience includes the Business School, Panjab University
(Chandigarh, India), R.H. Smith School of Business, University of Maryland (Maryland, USA)
and most recently Northumbria University (Newcastle UK) as a Visiting Fellow until 2009.
Currently he is a faculty at the Management Development Institute, Gurgaon, India. He holds a
PhD and MBA. Rajesh K. Pillania can be contacted at:

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