Greaves : An Analysis of Product Quality

& Customer Satisfaction

1.1 INDIAN ENGINEERING SECTOR

The Indian engineering industry forms the crucial backbone of the

economy and is intricately linked with umpteen other core sectors for its
demand. The engineering industry derives its demand from capacity
creations in core sectors viz., power, infrastructure, mining, oil and other
several other sectors including general manufacturing sector, consumer goods
industry, automotive and process industries. A slowdown in the economy
affects the engineering sector much before it affects other sectors. However in
an economic upturn this industry picks up last as various sectors like steel,
petrochemicals, automobiles need to perform well before they make capital
investments for capacity expansions. So it is the first one to be hit in case of an
economic down turn and last one to recover in case of an economic upturn .

Indian engineering industry is a diverse industry with a number of

segments and can be broadly classified into two sections namely heavy
engineering and light engineering:

Indian Engineering
Sector

Heavy Light
Industry 80% Industry 20%

1.1.1 HEAVY ENGINEERING INDUSTRY

The Heavy Engineering Industry comprises of capital

goods/machinery and equipment and transport equipment sub-segments. In
capital goods/machinery and equipment sub-segment, there are two-sub
segments namely electrical and non- electrical machinery. The electrical
machinery comprises power generation and transmission and distribution
equipment like motors and generators, switchgears, transformers and energy
meters. The non-electrical machinery segment comprises engines of all types,
material handling equipment, machine tools, textile machinery, printing
machinery earthmoving machinery boilers, turbines, high-end industrial
pumps, high-end industrial compressors, environmental control equipment

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 Greaves : An Analysis of Product Quality
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and fire protection systems. Transport Equipment segment comprises of

passenger cars, HCVs, LCVs, MUVs, two wheelers and three wheelers.

1.1.2 LIGHT ENGINEERING INDUSTRY

The Light Engineering Industry is a diverse industry with a number of

distinctive sectors and sub sectors. This sector includes low-tech items like
castings, forgings and fasteners to the highly sophisticated microprocessor
based process control equipment and diagnostic medical instruments. This
group also includes industries like bearings, steel pipes and tubes etc. The
products covered under the light engineering industry are largely used as
input to the capital goods industry. Hence the demand of this sector depends
on the demand of the capital goods industry.

1.2 ADVANTAGE INDIA

Skilled technical manpower

Competitive labor cost
Managerial excellence to deliver quality goods on time.
Indigenous availability of raw materials
Over 2500 companies have ISO 9000 certification
Large domestic market allowing economies of scale
Strategic location allowing exports to near and far countries
Diversified industrial base with supporting ancillary industries
Strong technological capabilities exist, particularly in certain sectors
such as electrical machinery, process plant machinery and general-
purpose machinery
Many leading world-class companies have manufacturing base in India

GM, GE, Ford, Caterpillar, etc.-US

Toyota, Sony, Honda, LG, Hyundai -East Asia
Siemens, Philips, Daimler Chrysler, Fiat, Lafarge - Europe

1.3 GROWTH OF THE INDUSTRY

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The Indian capital goods sector has shown a dramatic turnaround in

the last 20 months. The economy is buoyant with the GDP growth rate
projected at 8.4%. As a result key end user industries have seen a revival in
fortunes.

Key Growth Drivers

Domestic revival - Revival of industry, the key end user sector, has boosted
the performance of the capital goods industry.

Pick up in infrastructure spending – Another key determinant of the

demand for capital goods is the gross investment undertaken in the economy.
Government’s emphasis on power and construction sector has seen increased
demand for capital goods.

Outsourcing story- Engineering companies exhibit huge potential for direct

exports and outsourcing. Global manufacturing companies are preferring
India as an outsourcing destination due to its lower labor cost and better
designing capabilities.

Following are the Sales, Net profit, EPS, P/E of some of the top companies of
India for the year 2003, 2004 & projections for the year 2005.