CASE ANALYSIS

Suzlon Energy Ltd: Making Foray Abroad

-submitted by Anusree Balakrishnan (BD20011)

Attractiveness of the Wind Energy Market

With the growth figures of the industry over the last seven years (2000-07), it has grown
over five folds and it can be ascertained that there is tremendous market potential in
the Wind Energy market. The following points further substantiate the same:
 
 The forecast of Global Wind Energy Council (GWEC) showed that the global wind
market would grow by more than 155 per cent, reaching 240 gigawatts (GW) of
total installed capacity by 2012
 With the tremendous increase in human demand and limited stocks of fossil fuel,
wind energy has become one of the sustainable ways to meet energy demands.
 With the growing concerns regarding the greenhouse effect, the world is fast
shifting towards clean energy resources. The need for Wind Energy would
undoubtedly rise. The legal obligations put in place by the government are also
driving the growth.
 Only about 2 % of the land area is required for the wind turbines while installing
them on farmlands. The rest is available for other uses and this can enhance the
income of landowners.
 Continued growth in demand for clean, emissions-free wind power made the
demand to outstrip supply.
 
Competitor analysis:
Suzlon is a leading player in India, but globally Suzlon has other players for competition.
Some of them are:
 
 Vestas: It has massive market penetration and is expanded in more than 63
countries; they are leading producer of high technological wind power solutions.
 Enercon GmbH: It is the market leader in Germany with a key focus on
innovations. It has brought a lot of innovations to its turbines to attract
customers.
 Gamesa Corporación Tecnológica: It is into the fabrication of wind turbines but
also focuses on the construction of wind farms.
  GE: It is one of the leading turbine suppliers and has been in this field for a long
time.
 Goldwind: It is the leading manufacturer in China with support from the Chinese
government.
 Siemen: It is relatively new company with strong financial stability and also
having strong penetration in USA.

Most global markets are trying to incorporate the political change and the demand for
cleaner and sustainable energy. So, with constructive policies from governments
towards promoting renewable energy, the companies are finding massive potential in
this field.
Also, the key focus of the competitors is to increase innovation and scale the business.
With newer technologies, there are chances to bring down cost and provide more value
to consumers. Acquisitions also bring down the cost of products as they allow
companies to mass-produce new technologies.
Also, there is a threat from new players as they are finding a new business to make a
secure and profitable return and they have an advantage of available balance sheet
considering a large investment
The competition will emerge in this industry, and Suzlon has to decide the expansion
strategy to stay relevant in the field.
.

Future Expansion strategies and Recommendations

SWOT analysis for Suzlon:
Strength Weakness
 Market Leader in India  Don’t have a wide product
 Strong R&D facilities portfolio
 Present across 21 countries.  Not able to cater to existing
 A total wind Power Solution demand
 Decreasing growth of Profit
Opportunity Threats
 Government subsidies  High competition
 New trend in renewable and  Technology risk
cleaner energy  Acquisition alone won’t solve all
 Untapped global markets problems.

The following strategies can be Included by Suzlon:

  Since Suzlon has set up operations in so many countries, it is for sure that there
will be an increase in the demand of products, so Suzlon must maintain a proper
supply chain. Also, currently, the product range that Suzlon offers is less. To
expand in European and American markets, it must start offering large size
turbines.
 With the increase in demand for renewable energy and the incentives that
government provide are attracting players to this industry. To be relevant, Suzlon
must offer more product portfolios and must be able to meet the demand for
products on time.
 Suzlon should continue to consider backward integration so that it has sufficient
competitive capabilities. Already Suzlon owns a complete value chain, so further
acquisitions must be considered carefully. The company must install more wind
farms to expand more because many of its rivals are already doing it.
 Also, the majority of exports of Suzlon is to the US, it must try to target other
countries, for example, China. China is pressing developing its market through
domestic Winding energy equipment manufacturing companies, but they are no
match to the quality of product provided by Suzlon. So, Suzlon must eye
expansion in the Chines market.
 The company must also invest in its Research and development to come up with
a broader product range. As currently, the company is into making turbines of
capacity only from 1.5 to 2 MW. In Europe and the US, there is a significant
demand for larger turbines, so Suzlon must focus on catering those needs;
otherwise, its competitors must gain the market share.
 Suzlon must also find other manufacturing destinations apart from India, as there
can be market disruption risk and it is better to have alternatives. Suzlon can also
build a strategic relationship with local energy companies of different companies
which can help it to bypass restrictions faced by foreign companies in other
countries. 

Suzlon is a major player in India and majority of Suzlon’s manufacturing facility is located
in India due to cheap labour and manufacturing costs, and the products are exported to
various countries. But a single kind of product portfolio cannot meet the needs of
people everywhere. In case of Suzlon to penetrate to Europe and American markets, it
must expand its product portfolio. So, while trying to expand to markets abroad, Suzlon
must considering customizing product to local standards.
To minimize land and labour costs, wind farms are typically in rural areas. Presence of
wind energy developments in rural areas represents an opportunity for sustainable
developments. But the extent to which the rural community are has utilized the same is
still not clear. Such opportunities can lead to overall economic development. But on the
other hand, sometimes rural communities may not be able to adapt to the super
complex, technical system of energy providers that are governed by corporates. As a
responsible company, Suzlon must make sure that the latter doesn’t happen and must
provide an overall economic development to rural areas.