Business Strategies of

BHEL

Submitted to
Prof. Mate

Submitted by Group 2 (sec a)

Ashini Mody
Mohit Agnihotri
Raghunath Bhushan Shrikhande
Samanta Saha
Santosh Singh
Saurabh saxena
Sulagna chatterjee
Content Contributions
Introduction: Ashini Mody
Operational Strategies: Mohit Agnihotri
Supercritical Orders: Santosh Singh
PESTEL Analysis: Raghunath Bhushan Shrikhande
SWOT Analysis: Saurabh Saxena
BCG Matrix: Sulagna Chatterjee
GE Nine Cell Matrix: Samanta Saha
Recommendations: Santosh Singh

BHARAT HEAVY ELECTRICALS LIMITED:

INTRODUCTION
BHEL or Bharat Heavy Electricals Limited is the largest engineering and manufacturing
enterprise in India in the energy-related/infrastructure sector. BHEL is one of the nine large
Public Sector Undertakings known as Navratnas or nine jewels. BHEL offers over 180 products
and provides systems and services to meet the needs of core sectors like: power, transmission,
industry, transportation, oil & gas, non-conventional energy sources and telecommunication.

BHEL is the largest engineering and manufacturing enterprise in India in the energy-related /
infrastructure sector. BHEL manufactures over 180 products under 30 major product groups and
caters to some of the core sectors of the Indian Economy viz., Power Generation &
Transmission, Industry, Transportation, Telecommunication, Renewable Energy, etc. It has a
wide network of 14 manufacturing divisions, 4 Power Sector regional centers, with 100 project
sites, 8 service centers and 18 regional offices. It has got three Segments:

Segments

Power Transportation Industry Renewable EenergyOil and Gas

International Business

BHEL have diversified their business in Power, Transportation, Industry, Renewable Energy. Oil
and Gas and International Business sectors.

Integration

BHEL is more of a vertically integrated company with a captive foundry and forge plant,
seamless steel type plant, and specialized facilities for 800 kV transformers are also being
established. As almost all products are customized, horizontal integration is practically non-
existent and is not envisaged in the near future.

CORPORATE VISION, MISSION AND VALUES

Vision

A world class engineering enterprise committed to enhancing stakeholder value.

Mission
TO be an Indian Multinational Engineering Enterprise providing total business solutions through
quality products, systems and services in the field of energy, infrastructure, industry,
transportation and other potential areas.

Values

• Zeal to excel and Zest for change

• Integrity and fairness in all matters.
• Respect for dignity and potential of individuals.
• Strict adherence to commitments.
• Ensure speed of response.
• Faster learning, creativity and team work.
• Loyalty and pride in the company.

Work-Culture and Philosophy

The BHEL philosophy of professional excellence through continuous striving for state-of-the-art
technology is embodied by a strong team of 62,500 employees, including over 11,000 highly
qualified engineers. Continuous training and retraining, a positive work culture and participative
style of management have resulted in the development of a committed and motivated work force,
ready to meet the challenges of tomorrow. Workers' participation at all levels (even at the
Board); encouragement to all employees to participate in cultural, sports, educational and other
activities; and dedication to excel, coupled with safety habits, are other hallmarks of the BHEL
culture. The BHEL units are decentralized, independent and bureaucratic structure of work
organization is almost non-existent. Flexibility, rather than red-tapism is the norm in day-to-day
working.
Quality Strategy
The quality strategy at BHEL is to achieve highest international standards of quality at every
stage of operation through implementation of quality management systems and procedures in
consonance with international standards and practices. This is evidenced through state-of-the-art
design and technology adapted from world- renowned collaborators. BHEL has an independent
corporate quality department at its corporate office in New Delhi and all its 14 plants are ISO-
rated (ISO 9002 and ISO 9004). The first ISO certification for a few of its plants was acquired in
1989 and now even some of its offices are ISO-rated.
SERVICES

BHEL provides with certain services:

(a) Project Engineering:

The total engineering for thermal power stations is undertaken by a core group project
engineering management. With over 500 engineers and supporting staff, this division offers
specialized service in different technical disciplines.
b) Constructions Management:

BHEL has a full-fledged construction management division to undertake erection work. This
division well organized with over 500 experienced engineers,1000 technicians and 1300 skilled
workers besides construction equipment valued at over 40 million US Dollars.

c) Service After sales:

Renovation modernization and rehabilitation works of aged power stations are also undertaken.
BHEL has a separate spare group response for insuring ready availability of essential spares to
Power stations.

d) Projects Management:

Entrusted with the overall coordination of the project the division initiates, directs coordinates,
supervises and control all activities that are necessary for the performance of the project right
from the conception stage until the contractual obligations are fully discharged.

BHEL offers a wide spectrum of products and services for core sectors like power transmission
industry, transportation, oil & gas telecommunication etc, deseeds supply of non-conventional
energy systems. It has also embarked it to other areas including defense & aviation.

Major Achievements of BHEL:

• Acquired certifications for Quality Management Systems (ISO 9001), Environmental

Management Systems (ISO 14001) and Occupational Health & Safety Management
Systems (OHSAS 18001).
• Installed equipment for over 90,000 MW of power generation.
• Supplied over 2,25,000 MVA transformer capacity and other equipment operating in
Transmission & Distribution network up to 400 kV (AC & DC).
• Supplied over 25,000 Motors with Drive Control System to Power projects,
Petrochemicals, Refineries, Steel, Aluminum, Fertilizer, Cement plants, etc.
• Supplied Traction electrics and AC/DC locos to power over 12,000 km Railway network.
• Supplied over one million Valves to Power Plants and other Industries.

Operational Strategies

Manufacturing Units:

Company was set up at Bhopal in the name of M/s Heavy electrical (India) Ltd. in collaboration
with AEI, UK. Subsequently, three more plants were set up at Hyderabad, Hardwar and Trichy.
The Bhopal Unit was controlled by the company. The other three were under the Control of
Bharat Heavy Electricals Ltd. The Company's object is to manufacture of heavy electrical
equipments.

ANALYSING THE BUSINESS ENVOIRNMENT

Doubling capacity to 20GW by FY12

Generation capacity addition in the country has suffered in the past as BHEL was constrained for
capacity. BHEL enhanced its capacity to 10,000MW in FY07 from 6,000MW in FY06.
However, majority of this addition was for hydro generation sets (2.5GW) while the rest was due
to the commencement of a third shift of operations. In order to overcome such delays in future,
BHEL has charted out a 2-phase capacity expansion plan for its power division. In phase-I it will
add 5,000MW which is expected to commission by Q3 FY10 and further add another 5,000MW
by FY12, thus doubling its total installed capacity. This should enable BHEL to overcome delays
going forward. However, as the addition will happen over a period of time, we have factored in
some delays into our estimates. In order to overcome supply chain issues, BHEL has entered into
joint ventures with NTPC, Heavy Engineering Corp Ltd, Toshiba, and NPCIL.
Ventures entered into by BHEL

JV / MoU Venture details

NTPC Power equipments

Toshiba Transmission equipments

Heavy Engineering Corp Ltd Supply of castings and forgings Sheffield, UK

Power equipments

NPCIL Nuclear power equipments

TNEB Super-critical thermal power plant GE Diesel

locomotive

Rs1.1trn order book provides strong visibility: Robust investments in the power sector
coupled with BHEL’s dominance in the power equipment space translated into a robust order
book. BHEL ’s order book of Rs1.1trn, grew by 3.5x over the past five years, is 5.3x FY08 gross
s revenues provides strong revenue visibility. In order to avoid dela ys, it is doubling capacity to
20,000MW by FY12. Since majority of the orders are from the Government and NTPC, BHEL is
insulated from lower payment risk and order cancellations. We believe BHEL’s order book will
continue to grow as fresh investments are announced in the power sector.

Lower commodity prices w ill positively impact margin: In order to overcome supply chain
issues, BHEL stocks its key raw materials for a period of four-six months. For the 9M FY09
steel prices were higher by ~48% yoy, thus negatively impacting margins for the year. However
with prices correcting by 51% over the past 7 months and BHEL consuming its high cost
inventory in Q4 FY09. Also its staff cost will increase marginally as the full impact of sixth pay
commission will be accounted for in FY09.

Beneficiary of robust investments in the power sector BHEL being the largest power
equipment supplier in the country is a direct beneficiary of the robust investments planned in the
power sector. Apart from gaining orders for BTG, it will also benefit from EPC orders for
generation, transmission and distribution. Robust investments in the overall infrastructure space
will enable BHEL’s earnings to witness 33% CAGR over FY09-11.

Supercritical orders put BHEL in the big league:

In the past BHEL has been unable to bag any supercritical orders. Of the three UMPP ’s that
were awarded to Tata Power (Mundra) and Reliance Power (Sasan and Krishnapatnam), non
have been awarded to BHEL. Tata Power awarded the main plant package to Toshiba-Doosan
while Reliance Power awarded it to Shanghai Electric for its Sasan UMPP. Reliance Power is yet
to award contracts for its Krishnapatnam UMPP. However, BHEL has been successful in
breaking the jinx as it bagged orders for 600MW and 800MW turbines from NTPC ’s Barh,
APGENCO ’s Krishnapatnam and TNEB, thus putting it into the big league. We believe BHEL
will continue to receive more such orders as the Chinese players cannot bid for the 565 super
heat and 593 reheat supercritical machines. Moreover, BHEL is insulated by the rupee
depreciation which gives it a ~25% cushion against imports.

Supercritical orders awarded to BHEL

Client Location Capacity Order Value (Rs bn)

NTPC barh 2x660 14

APGENCO Krishnapatnam 1x600 13

TNEB Tuticorin 2x800 87

Huge opportunity in the power sector

India will continue to be a power deficient country for the next few years. Thus it makes it
imperative for the country to add more capacity to suffice its ever growing demand. In order to
meet the mission of “Power for all by 2012 ”the country plans to add ~160GW over the FY08-
17. This translates into ~US$150bn opportunity for the power equipment players. BHEL being
the largest player controlling 65% of the domestic market is a direct beneficiary of this
opportunity. BHEL’s equipments are form 64% of the country ’s genera ting assets. BHEL will
also benefit from R&M orders of ageing plants across the country. In addition, BHEL will also
benefit as competition from Chinese and Korean players remains low. It recently outbid its
international counterparts under the international competitive bidding to win an order for 2 sets
of 600MW in Madhya Pradesh. This should enable BHEL to grow its order book going forward
and reap benefits of higher investment in the sector. We expect BHEL to continue to maintain its
64% market share going forward.

Key Success Factors

1) Power projects are typically awarded through the International Competitive Bidding (ICB)
route, where pricing is an important criterion in awarding the contract. Cost competitiveness is
dependent on factors such as access to technology at low costs, local manufacturing facilities
resulting in lower freight costs, low manpower costs and efficient procurement and processing
practices.
2) As the share of IPPs in new capacity additions increases over the long term, the ability to
provide finance and take up equity stakes in these projects will influence the competitive position
of Power plant equipment manufacturers.
3) Power projects are long gestation projects involving significant risks relating to project
completion and implementation. The past track record of the PPE manufacturer in the country
and in international markets also plays an important role in winning project bids.
4) The PPE industry is technology intensive, with significant investments required in R&D to
improve efficiency and performance, and keep pace with technological developments in the
sector. The ability and resources to invest in research is a significant competitive advantage for
global leaders in the PPE industry.

PESTEL ANALYSIS

Political Factors:

BHEL being a public sector undertaking is greatly influenced by the political forces. There is a
change in policies every time the government changes. The business decisions are steered to a
great extent based on the individual preferences of the new leadership. The company does big
business overseas and these projects are directly dependent on the incumbent ruler’s international
trade policies. BHEL has, over the years, established its references in more than 70 countries
across the world, encompassing almost the entire range of BHEL products and services, covering
Thermal, Hydro and Gas-based turnkey power projects, Substation projects, besides a wide
variety of products like: Transformers, Compressors, and Heat Exchangers etc.

The government policies and regulations relating the company’s client industries can largely
affect the future of its business with these customers. For example, power sector has seen a
massive growth in the last few years and has been at the top of the political agenda. Now power
companies are the major clients of BHEL. Promotion of the sector augers well for the
organization as it can crack heavy deals with these companies. Moreover, the power sector was
deregulated in 2003, which opened doors for the entry of private players in the market.
Such entrants can also be potential customers for the company.

Being a PSU, it is the preferred choice for the other state-run entities and also the defense
services. It developed the Automatic storage & retrieval system (ASRS) for storage and
inventory management system of the Indian Army. The Company has signed a MoU with
APGENCO for setting up a 125 MW IGCC (Integrated Gasification Combined Cycle)
technology plant at Vijayawada. This is an eco-friendly, clean coal technology.

Economic Factors:

The economic boom in India particularly in the last one decade has played a significant role in
charting the success of the company. Lot of Industrialization has been brought about, which has
always been a catalyst for BHEL’s sprinting growth. Businesses are dependent on each other for
their survival and help themselves flourish mutually. When the economy does well all businesses
ride up the rising wave.
Power Generation is one of the primary indices of a country’s economic development. As of
31.3.2008, BHEL- supplied sets accounted for nearly 64% of the total installed capacity in
the country, contributing 73% of the total power generated in the country.
BHEL manufactures and supplies major capital equipment and systems like captive power
plants, compressors, industrial boilers, gas turbines, pumps, heat exchangers, electrical machines
etc. to a number of industries like, metallurgical, mining, cement, paper, fertilizers, refineries &
petro-chemicals, etc., other than power utilities. The growth of these industries has multiplied the
turnover of the company leaps and bounds in the last few years.
Turn key projects are the need of the hour and BHEL has proven turnkey capabilities for
executing power projects from Concept-to Commissioning.
In the area of urban transportation, BHEL is geared up for turnkey execution of electric trolley
bus systems, light rail systems and metro systems. Mass transport systems are a must for a
growing economy.

Social Factors:

In India the whole country and its people are poised for a giant leap towards economic growth
and prosperity. People have realized how important it is for the economy to develop for their
own betterment. Levels of awareness have gone up drastically and people are much more open to
industrial growth. However, having said that BHEL should also ensure that the company’s
actions do not come in the way of any of the stakeholders, its decisions are ethical and don’t
encroach upon the rights of the society. The company should not be negligent towards societal
interests and rights.
Companies are taking more interest in corporate social responsibility these days and steps
have been taken by BHEL too to further the same. Its contributions towards CSR till date
include adoption of villages, free medical camps/charitable dispensaries, schools for the
underprivileged and handicapped children, ban on child labor, disaster/natural calamity
aid, Employment for handicapped, Widow resettlement, Employment for Ex-serviceman,
irrigation using treated sewage, pollution checking camps, plantation of millions of trees,
energy saving and conservation of natural resources through environmental management.
Companies that are sensitive to the needs and development of the society normally draw people’s
attention and respect faster and can create a superior moral image in the minds of their partners
and clients, the same showing more interest in working with an ethical and socially conscious
group.
BHEL has established the Human Resource Development Institute in Noida, which forms a
cornerstone of BHEL’s learning infrastructure. The centre through various HRD efforts ensures
that Human Capital - is “Always in a state of Readiness” to meet the dynamic challenges posed
by a fast changing environment. This not only helps in achieving the organizational goals, but it
also serves as a platform to train aspiring and competent youth of the nation.

Technological Factors:

BHEL being an engineering and manufacturing giant is to a great degree driven by technological
developments and innovations and has its earnest efforts directed towards improving its
technological prowess to meet the changing requirements of a growing economy. At the same
time the company has to keep pace with the developments happening in its business areas, else it
will be knocked out by the competitors. BHEL has been a leader always and the fact that
India’s first underground metro at Kolkata runs on drives and controls supplied by BHEL
is a testimony to this.
The government is setting up supercritical thermal power plants in the country, each
generating around 2500-4000 MW and has plans to come up with many more in the near
future. BHEL has developed the technology and capability to produce large capacity
thermal sets with super critical parameters to gear up for this requirement.
The Company has proven expertise in Plant Performance Improvement through renovation and
up-rating of a variety of power plant equipments to improve the performance of existing plants.
It has also emerged as a major supplier of controls and instrumentation systems for various
power plants and industries.
For enhancing the power transfer capability and reducing transmission losses in 400 kV lines
BHEL has indigenously developed a state-of-the-art 400 kV Controlled Shunt Reactor for
reactive power management of long transmission lines.
R&D plays a big role in technological development and BHEL attaches a lot of importance to it
all the same. BHEL’s investment in R&D is among the highest in the corporate sector in India.
Products developed in-house during the last five years contributed 13.80% to the revenues
in 2007-08.
Besides this, the company has developed many eco-friendly technologies to serve the
environment conscious.

Environmental Factors:

BHEL is an environment friendly company in all its activities, products and services
besides providing safe and healthy working environment to all its stakeholders. The
depleting water and energy resources are a cause of concern for all. BHEL has taken certain
measures to conserve these precious resources. It has set up rainwater Harvesting Plants and
Energy Conservation Projects utilizing efficient technologies.

Proper disposal of Chemical and other wastes is also a major concern for which the
company has put up Chemical storage and disposal plants. All these projects helped in
creating pollution free environment, conservation of precious resources like energy, water, fuel
oil, coolant besides installation of proper system for storage/handling of chemical waste.
The company has made the principles of the Global Compact program of the United Nations a
part of its strategy, culture and day-to-day operations. Global Compact is a partnership between
the United Nations, the business community, international labor and NGOs and has a set of core
values enshrined in its ten principles on human rights, labor standards, environment and
anticorruption.
BHEL has been manufacturing and supplying a range of Renewable Energy products and
systems. BHEL is actively associated with the development and adoption of Hydel, Wind
Power and Concentrated Solar Power (CSP) projects in India and abroad. It has developed
a technology for reduction of NOx gases from coal-based thermal power plant. The company is
also taking active interest in CDM (Clean Development Mechanism) Projects and activities.

Legal Factors:

BHEL has attained ISO - 9001 certification for quality management and all its manufacturing
units/divisions have been upgraded to the latest ISO-9001: 2000 version. All the major
units/divisions of BHEL have been awarded ISO -14001 certification for environmental
management systems and OHSAS-18001 certification for occupational health and safety
management systems. The company has to adhere to the scores of legal rules and
regulations, the acts, particularly the Companies Act 1956, The Factories Act, the
Environmental Protection Act, Sale of Goods Act etc.
These days no company wants to be unethical in its activities and be on the wrong side of the law
books, as the media in India is very active and the smallest of irregularities noticed and reported
by them can ruin the image of the company hugely.

SWOT ANALYSIS
Strengths

➢ Good corporate image

➢ Complete range of products for transmission and distribution
➢ Established Brand Name
➢ Considered to be having design ability

Weakness

➢ The procurement process in the company is cumbersome and subject to auditing

➢ Low exposure to the needs and dynamics of distribution business
➢ Role clarity on the requirement of being an equipment supplier or a solution provider
➢ Acceptance of customers to execute low value high volumes jobs

Opportunities

➢ Huge investment leading to greater demand of goods and services

➢ Demand leading to industry operating at full and over capacity
➢ Better price realizations
➢ Earl birds to learn faster and achieve repeat orders
➢ Formation of business groups and tie ups for joint bidding
➢ Healthier working environment and increased private sector participation in operation of
distribution circles also.

Threats

➢ Purchased preference may be extended to distribution sector

➢ Increased in number of small contractors leading to price wars
➢ Emergence of new players in the market.
➢ Political pulls and pressures may jeopardize the hole process, raising alarm about the
privatization and being anti-people

Strategies to capitalize the strengths

➢ Having a good brand image and product portfolio, they should aggressively defend and
increase the market share.
➢ Improve internal efficiency and productivity of the employees.

Strategies to improve the weakness

➢ Improve the speed and quality of purchases as the competition in this range is with small
contractors
➢ To create channel partners rather than operate as individual companies

Strengths opportunities (SO) strategies

➢ Increase market share aggressively

 ➢ Present a better way of performing the jobs in tune with the established brand name
➢ To address the demand in all the parts of nation to gain wide spread experience and
exploit the opportunities
➢ To offer design solutions to the customers
➢ Invest money in the process to have financial advantage

Weakness opportunities (WO) strategies

➢ Improve procurement cycle and reduce the process difficulties

➢ Execute pilot projects to gain experiences and minimize risks

Strengths Threats (ST) strategies

➢ To increase lobbing with the government to prevent extension of purchases preference

and maintaining level playing field in the segment.
➢ To check the emergence of new players and be well prepared to counter them
➢ To be cautious in the event of change of the government and the process of reforms
falling off the track.

Weakness Threats (WT) strategies

➢ Reduce costs to increase margins

➢ To train manpower to counter the threats of enhanced competition and to execute the job
efficiently

BHEL in order to get considerable and profitable share in the increasing competitive market, we
need greater emphasis on the following areas

➢ Increasing market share- aim to increase penetration.

➢ Price Competitiveness
➢ Brand building exercise- To gain customers confidence in the distribution business also

This above can be achieved through

➢ Pre tendering activities to help customers developing specifications calling for superior
quality products.
➢ Increased level of public relations with the customer through dedicated marketing and
sales team.
➢ Improving the flow of information and speed of response towards the customers.
➢ Cost cutting exercises within the organization to improve realizations.
➢ Awareness about the market development and competitors strategies.
➢ Innovative ideas like life enhancement of the old equipments, retrofitting old equipments
etc. This will in increasing the customer’s confidence.

Market Dominance in the Indian Power Sector - The Company has a formidable success
record in bidding for projects implemented by state owned NTPC and SEBs. BHEL has adopted
several technologies to suit Indian conditions. The company has demonstrated the ability to
implement projects successfully without time and cost overruns. All these factors make BHEL a
strong player in the Indian market.
Cost Competitiveness - The company's cost competitiveness results mainly from the its
depreciated plants, the domestic manufacturing facilities and the low employee costs.
Strong Presence in other Core Sectors in the Industrial Segment - In order to reduce volatility in
its revenue stream from the power sector, BHEL has developed and successfully sold products to
cater to the industrial sectors like oil refining, petrochemicals, paper, defence and transport
sectors, leveraging its manufacturing facilities and technical skills.
Areas of concern
Financing Capability - Though BHEL is competitive with the international majors in terms of
cost, delivery and equipment in the domestic market, the company ’s inability to match financial
packages provided by the multinationals (MNCs) has been one of its major weaknesses.

EXPECTED INCREASE IN INTERNATIONAL MARKET AND OPPOTUNITY FOR

BHEL

Bharat Heavy Electricals Ltd is planning to triple export orders to Rs10300 crore by 2012. Bhel
currently has orders worth Rs1.10 trillion. Its international projects contributed Rs 3,200 crore
till date to Rs 24,000 crore worth of orders generated in the fiscal year that began in April. While
organic growth is expected to contribute Rs 6200 crore to its order book by 2012, the remaining
Rs 4,100 crore will come from acquisitions and joint ventures. This is expected to go up to Rs
8,000 crore each (through organic and inorganic growth) by 2017.

BCG MATRIX

BHEL has its contribution are 6 sectors. These sectors are as follows:

1. Power
2. Transmission
3. Industries: Petrochemicals
4. Refineries, Cement etc.
5. Oil and Gas
6. Non-Conventional energies
7. Transportation
The breakup of the two major sectors diagrammatically can be represented
as follows:

Business Mix Industry Segment Break-up

Power sector:

The power sector consists of turbines SBU and Boilers SBU. BHEL is the
topmost producer of boilers with two third market share and even turbines
and generators are manufactured the most by them again making them the
market leader. But the Indian power sector is not growing uniformly and
government wishes to have a double increase in growth. Thus Indian power
sector is a steady and non uniform growth sector and not grown enough to
match the demand. Hence it’s a slow growth sector. Thus the SBUs come in
the cash cow segment of BCG matrix

Mar
Stars Question marks
ket
gro
wth
rate
Dogs
Boilers
Turbines

High

Market share of the SBU

low
high
low

In this case, it is clear why BHEL is more involved in this sector as it can gain
huge profits by investing comparatively low. Thus it is the most profitable
sector for BHEL and is the net supplier of resources.

Transmission sector:

The transmission sector comes under the industry segment which caters to
22% of BHEL’s industry segment. It consists of gas insulated substation SBU
and transformation SBU which holds a good market share and the growth in
this sector is much more than power sector which is 40% y-o-y. Thus these
are the question mark products of BHEL and should be invested upon
more to bring it to star position. It should invest more in technology to
sustain competition in this sector and saving it from becoming a dog
product.

Mar
Stars
ket Gas substation
gro transformation
wth
rate

Cash cows Dogs

High

Market share of the SBU

Low

High
low

Industrial sector:

The industrial equipment sector consists of control system and

instrumentation SBUs and comprises of 62% share of the industry sector of
BHEL. This sector has recorded a reduced growth rate of 9.2% compared to
last year but BHEL holds a healthy market share of around 70% in these
SBUs. Thus due to high market share and low growth it is also a cash cow
sector for BHEL and profitable for improving the business of other sectors.
The BCG matrix of this sector looks like

Mar
Stars Question
ket marks
gro
wth
rate

Dogs
Control system
instrumentation

High
 Low

High Market share of the SBU

low

Refineries and cement sector:

The cement sector does not have any individual player who accounts for
more than 12% of market share. But the growth of cement sector has
dropped to 10.43%. Hence, BHEL with a small market share in a slow growth
market is a dog SBU.

The refineries SBU takes a good share of the market and it is growing rapidly
in India at 62% which accounts to a high growth. Thus with a high market
share and high growth this is a star SBU for BHEL and it should reap upon the
most on it.

The BCG matrix looks as follows:

Mar
Refineries Question
ket marks
gro
wth
rate

Cash cow Cement

high
low
Market share of the SBU
High
low

Oil and Gas sector:

The oil and gas sector is growing by 45% in which the major contribution is of
gas sector. Since BHEL is one of the oldest producers of drilling equipments it
has a good market share in its supply. But due to cheap and technologically
better equipments supply from international level, BHEL has lost significant
market share. Due to the high growth market and decreasing market share it
is a question mark product now and BHEL should decide fast whether to
invest more and improvise market share or divest from this sector. The BCG
matrix can be presented as follows:

Mar
Star
ket Oil
gro gas
wth
rate

Cash cow Dog

high
low
Market share of the SBU
high low

Non conventional energies:

The renewable energy sector especially wind energy is seeing a massive

growth y-o-y. Thus it’s a highly growing market. But due to many producers
of equipments and foreign competition BHEL has not succeeded to secure a
high market share. In fact all producers hold more or less similar market
share. But due to the overseas expansions of BHEL it has a high market
share in this sector. Thus this is on the verge of becoming a star product for
BHEL.

Mar
Question mark
ket Renewable energy SBU
gro
wth
rate
Cash cow Dog

high
low

High Market share of the SBU

Low

Transportation sector:

BHEL is the largest supplier of locomotives to Indian railways thus holding a

huge market share. Moreover, this sector is expanding by leaps and bounds.
Hence this SBU is also a star product for BHEL and it should improvise on this
by implementing high technology and newer products.

Mar
Question mark
ket Renewable energy SBU
gro
wth
rate
Cash cow Dog

high
low
Market share of the SBU
high
low

The GE Nine-Cell Planning Grid

1. Turbine and Boiler SBU

Table 1.1 Industry Attractiveness Factor

Industry Weight Rating Score

Attractiveness
Factor

Market size 30 .5 15
Projected market 30 1 30
growth
Technological 30 1 30
requirements
Concentration 10 0 0
Total 100 65
High/Favourable = 1; Medium = .5 Low/Unfavourable = 0

Table 1.2. Business Strength Factor

Business Weight Rating Score

strength factor

Relative market 20 1 20
share
Production

Capacity 20 .5 10
Efficiency 10 1 10
Location 10 .5 5
Technological 25 1 25
capability
Marketing

Sales organization 15 1 15
Total 100 85

2. Control system and Instrumentation SBU

Table 2.1 Industry Attractiveness Factor

Industry Weight Rating Score

Attractiveness
Factor

Market size 30 1 30
Projected market 30 1 30
growth
Technological 30 1 30
requirements
Concentration 10 0 0
Total 100 90

Table 2.2 Business Strength Factor

Business Weight Rating Score

strength factor

Relative market 20 1 20
share
Production

Capacity 20 .5 10
Efficiency 10 1 10
Location 10 .5 5
Technological 25 1 25
capability
Marketing

Sales organization 15 1 15
Total 100 85

3. Railway SBU

Table 3.1 Industry Attractiveness Factor

Industry Weight Rating Score

Attractiveness
Factor

Market size 20 .5 10
Projected market 30 1 30
growth
Technological 30 1 30
requirements
Concentration 20 .5 10
Total 100 80

Table 3.2 Business Strength Factor

Business Weight Rating Score

strength factor

Relative market 20 .5 10
share
Production

Capacity 20 .5 10
Efficiency 10 1 10
Location 10 .5 5
Technological 25 1 25
capability
Marketing

Sales organization 15 .5 7.5

Total 100 65.5

4. Solar energy SBU

Table 4.1 Industry Attractiveness Factor

Industry Weight Rating Score

Attractiveness
Factor

Market size 30 .5 15
Projected market 20 .5 10
growth
Technological 30 1 30
requirements
Concentration 20 0 0
Total 100 55

Table 4.2 Business Strength Factor

Business Weight Rating Score

strength factor

Relative market 20 1 20
share
Production

Capacity 20 .5 10
Efficiency 10 .5 5
Location 10 1 10
Technological 25 1 25
capability
Marketing

Sales organization 15 1 15
Total 100 85

5. Drilling SBU

Table 5.1 Industry Attractiveness Factor

Industry Weight Rating Score

Attractiveness
Factor

Market size 30 .5 15
Projected market 20 .5 10
growth
Technological 30 1 30
requirements
Concentration 20 0 0
Total 100 55

Table 5.2 Business Strength Factor

Business Weight Rating Score

strength factor

Relative market 30 .5 15
share
Production

Capacity 10 1 10
Efficiency 10 .5 5
Location 10 0 0
Technological 25 .5 12
capability
Marketing

Sales organization 15 .5 8
Total 100 50

6. Transformer SBU

Table 6.1 Industry Attractiveness Factor

Industry Weight Rating Score

Attractiveness
Factor

Market size 30 1 30
Projected market 30 1 30
growth
Technological 30 1 30
requirements
Concentration 10 0 0
Total 100 90

Table 6.2 Business Strength Factor

Business Weight Rating Score

strength factor

Relative market 30 1 30
share
Production

Capacity 10 1 10
Efficiency 10 .5 5
Location 10 0 0
Technological 30 .5 15
capability
Marketing

Sales organization 10 1 10
Total 100 70

7. Thermal SBU
Table 7.1 Industry Attractiveness Factor

Industry Weight Rating Score

Attractiveness
Factor

Market size 30 0 30
Projected market 30 .5 15
growth
Technological 30 .5 15
requirements
Concentration 10 0 0
Total 100 60

Table 7.2 Business Strength Factor

Business Weight Rating Score

strength factor

Relative market 30 .5 15
share
Production

Capacity 10 1 10
Efficiency 10 .5 5
Location 10 0 0
Technological 30 .5 15
capability
Marketing

Sales organization 10 .5 5
Total 100 50
The GE Nine-Cell Planning Grid

Market size
Projected market growth
Technological Requirements
Concentration

Industry Attractiveness

High Medium Low

Relative
market share.

Capacity
From the above matrix we can conclude that
Efficiency
Strategy SBU
Technologival
Invest/Grow Turbine and boiler SBU, control system and
capability
instrumentation SBU and Drilling SBU
Sales
organization
Invest selectively Railway SBU, Solar energy SBU and
Transformer SBU

Divest None

RECOMMENDATIONS:
BHEL is a dominant player in the Indian Power Plant Equipment industry (PPE), with a sales
turnover of Rs. 21,401 crores in 2008-09. The company is the market leader in the power
equipment business and BHEL sets now account for around 65% of the country’s total installed
power generating capacity. The company also enjoys leadership in electrical equipment such as
motors, transformers and High Tension (HT) switchgear. The company is the only player in the
Indian market to be able to supply the entire range of power plant equipment with local
manufacturing facilities.
BHEL has a cost advantage over any other player planning to set up new facilities in India,
due to depreciated plants, and existing infrastructure at several locations. The company is
also better positioned to supply PPE within the country as compared to equipment imports due to
lower freight costs, especially of high volume equipment. Local manufacturing facilities also
facilitate lower transportation lead times and thereby shorter delivery schedules.
However the PSU status of the company and the consequent emphasis on elaborate
procedures does not permit quick commercial decisions, essential for efficient functioning
in a competitive environment. BHEL ’products are technology intensive, with continuous
developments taking place in various segments in PPE, power transmission and
transportation equipment. In the past, the company has entered into a number of technological
collaborations with international majors for most products, and has successfully adapted
technology for Indian conditions. While other players are global, BHEL's capacity is less than 10
per cent of global capacity and its sales are restricted mainly to the Indian market, with exports
accounting for less than 5% of sales. BHEL’s relatively small size of operations limits its ability
to make the necessary investments in R&D to keep pace with the international majors in
technological developments in the sector. The company, therefore, has been relying primarily
on technological collaborations/licensing arrangements with several overseas companies to
meet its technology needs. However, there is a need to step up investment in R&D within
BHEL to improve the quality of its PPE and Industrial products in order to compete more
effectively in the market on their own.
The ability of PPE manufacturers and EPC contractors to provide financial support to the project
plays an important role in the award of contracts. BHEL's competitiveness in relation to its
global competitors has been adversely affected by its inability to match the financial packages
offered by MNCs along with equipment supply offers. BHEL has not been able to secure more
contracts abroad partly due to lack of global track record but mainly due to its inability to offer
competitive financing packages. Its presence abroad is, therefore, marginal. The company
would need adequate project and equipment financing capabilities if it has to gain a
competitive edge over its MNC competitors, both in India and abroad. Though BHEL
enjoys a dominating market position in most of its products, in regard to supplies to State and
Central sector power utilities, the presence of a large number of players including private sector
and Multi-National players and the forces of competition in the power sector have made the
market fully contestable. IPPs have sourced their equipment from foreign suppliers who have
taken equity and arranged cheap credit from their financial sources and BHEL has got a very
small share of their orders. With the increasing share of new capacity envisaged to be set up by
IPPs in the future, BHEL has to become more competitive in a comprehensive manner in an
increasingly competitive market.
The Commission is of the view that low cost of production is a valuable strength for BHEL.
Additionally, BHEL also needs flexibility, autonomy and financial support to consolidate
its market position in the country and expand its international operations. While autonomy
could be provided to the company by reduction of Government’s equity stake in BHEL below
51%, support from financial institutions would be critical for enhancing the financing capability
of the company and enabling it to compete successfully with MNCs, both in India and abroad.
A strategic partnership of one of the global major power equipment manufacturers with
BHEL would, on one hand, help through a better access to technology for the related
products but, on the other hand, could lead to possible conflict of interest with the
partner’s global consolidation strategy and could undermine BHEL’s market position in
the products that are part of the partner’s product range. Based on the recommendations
made above the business of BHEL can be expected to rise as follows:

BIBLIOGRAPHY

www.bhel.com
www.steelguru.com
www.ntpc.co.in
www.economictimes.com
www.businessstandard.com
www.machinist.in
www.thehindubusinessline.com
www.wikipedia.org
www.iloveindia.com
The Economist
Business Today