Strategic Management Project Report -Larsen Toubro ECC

Submitted To: Prof. Veeresh Sharma

Submitted By: Akshay Garg | 15P066

Table of Contents
Page No.

Executive Summary
Introduction: About L&T
L&T ECC
External Audit for L&T ECC: Indian Construction Industry
External Audit for L&T ECC: Analysis using PESTEL Framework
External Audit for L&T ECC: Analysis using Porters % forces Model
External Audit for L&T ECC: Key Competitors Analysis
Internal Audit of L&T ECC: SWOT Analysis
Internal Audit of L&T ECC: Vision, Mission, Resource & Capabilities
Internal Audit of L&T ECC: Core Competencies
Internal Audit of L&T ECC: Value Chain Analysis

Finding of the FIT without missing the Strategic Intent

Conclusion

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Executive Summary

Larsen & Toubro is one name which almost every educated person knows about. It is an Indian Multi
National Conglomerate and it is head quartered in Mumbai, Maharsashtra. The company does business in
the various segments like construction, engineering, information technology and others. In 2015 the
revenues of the group was Rs 94177 crores and the number of the employees working was 84027.With
the slogan Its all about Imagineering L&T has been a key player in the engineering and construction
industry and played a major role in nation building since 7 decades. Of the many divisions of the group
L&T ECC(Engineering, Construction and Contracts) is the biggest part and it contributes more than 50%
of the revenue and it is because of this division everyone knows L&T. For this reason I decided to focus
on this division for doing this project in Strategic Management to discuss the future strategies for L&T
ECC under the guidance of Prof Veeresh Sharma.
The projects starts with introducing the group and the division and then we move towards doing an
External Audit for the company keeping in mind the external environment including various factors like
economical, technological, social, political using the PESTEL framework and then we do an industry
analysis using Porters 5 Forces model followed by a competitors analysis for L&T ECC. Here we find
out that the industry is having many players and the various PESTEL factors affect the industry in a mix
of positive and negative ways. The industry is seeing moderate growth and with the boost and the thrust
on the infrastructure development in the country the future appears good for the industry.
Then we come to the Internal Audit for L&T ECC where we find out the strengths, weaknesses of the
company using the SWOT analysis. We find out that the core competencies of the company is the ability
to take up projects of varied sectors and segments and completing them in time with least amount of
resources. We also find out the opportunities and the potential threats for the company where we find that
the existing players are threats to the company both in India and abroad along with rising cost of capital
and materials. But the opportunities lie in the fact that infrastructure spending will increase in the future
and also through joint ventures and subsidiaries of the L&T group the ECC division will be able to get
more and more projects in the future.
And finally using the TOWS analysis we have tried to suggest some future actions to use their strengths
and competencies to mitigate the effect of rivals, threats and their internal weaknesses. These include

many like starting to focus on the foreign markets, going for joint ventures ,Laying stress on cost
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optimization and prevention of wastage of resources, going for more CSR activities both in India
and abroad to get the government support, going for organizational overhaul to get more
coordination in the subsidiaries and divisions etc.

Introduction
About Larsen & Toubro Limited
Larsen & Toubro Limited, also known as L&T is an Indian multi-national conglomerate headquartered in Mumbai, Maharashtra, India. It was founded by Danish engineers taking refuge in India, as
well as an Indian financing partner. The company has business interests in engineering, construction,
manufacturing goods, information technology, and financial services, and also has an office in the
Middle-East and other parts of Asia.
L&T is the India's largest engineering and construction company. L&T was described by NDTV in 2013
as a "bellwether of India's engineering & construction sector" L&T was recognized as the Company of the
Year in Economic Times 2010 awards.
Some facts:
o

Key people: S N Subrahmanyam (President and DMD), A M Naik (Executive Chairman)

Products: Real Estate (Realty), Construction, Heavy equipment, Electrical equipment, Power,
Shipbuilding, Financial services, IT Services

Revenue: Rs 94177 crores (2015)

Profit: Rs 4933 crores (2015)

Total Assets: Rs 128159 crores( 2015)

Employees: 84027 (2014)

Source:www.lntecc.com
History of Larsen and Toubro

Larsen and Toubro (L&T) is an innovation, designing, development and assembling organization. It is one
of the biggest and most regarded organizations in India's private segment. Larsen and Toubro Limited is
the greatest legacy of two Danish Engineers.They came to India as agents of the Danish building firm F L
Smidth and Co regarding the merger of bond organizations that later assembled into the Associated
Cement Companies. Together, HolckLarsen and Toubro, established the organization firm of L&T in
1938, which was converted into a restricted organization on February 7, 1946. The organization has
started from humble beginnings to an extensive conglomerate spreading over building and development.
ECC was Engineering Construction Corporation Limited in April 1944 and was later merged into L&T
limited as a completely possessed auxiliary. L&T's originators Holck Larsen and Toubro established the
framework for ECC.
It has today risen as India's driving development association. During 1940s L&T gained reputation as a
solid fabricator with exclusive requirements. In 1944, ECC was joined. By 1945, the Company spoke to
British makers of gear used to fabricate items, for example, hydrogenated oils, scones, cleansers and
glass. In 1945, L&T consented to an arrangement with Caterpillar Tractor Company, USA, for promoting
earthmoving hardware. Around the end of the war, substantial quantities of warsurplus Caterpillar
hardware were accessible at alluring costs; however the money required were more than the limit of the
accomplices. This motivated them to raise extra value capital and on seventh February 1946, Larsen and
Toubro Private Limited was conceived. Workplaces were set up in Kolkata (Calcutta), Chennai (Madras)
and New Delhi.
In 1948, 55 acres of land of undeveloped swamp and wilderness was obtained in Powai. Here L&T
Complex has come up. In December 1950, L&T turned into a Public Company with a paidup capital of
Rs.2 million. The business turnover in that year was Rs.10.9 million. Prestigious projects executed by the
Company during this period were the Amul Dairy at Anand and Blast Furnaces at Rourkela Steel Plant.
With the effective completion of these occupations, L&T developed as the biggest erection contractor
company in the nation. In 1956, a significant part of the organization's Bombay office moved to ICI
House in Ballard Estate. After 10 years this forcing greystone building was acquired by L&T, and
renamed as L&T House its Corporate Office.
The sixties witnessed 10 years of quick development for the organization, and saw the arrangement of
numerous new pursuits: UTMAL (set up in 1960), Audco India Limited (1961), Eutectic Welding Alloys
(1962) and TENGL (1963). In the decade that took after, the organization grew quickly and by 1973 had
ended up one of the Top25 Indian organizations. In the coming decades organization developed into a
designing major under the direction of pioneers like N. M. Desai, U. V. Rao, S. D. Kulkarni and A. M.
Naik. Today, L&T is one of India's greatest and best known mechanical associations. It is additionally
finding a way to develop its global vicinity.
Business Area and Divisions:

Business area of the company includes:

Turnkey Projects

Construction

Engineered Products & Systems

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Electrical & Electronic Products & Systems

IT & Engineering Services

Machinery Valves & Industrial Consumables

Financial Services

Shipbuilding

Divisions:

Engineering & Construction Projects (E&C)

Heavy Engineering (HED)

Engineering Construction & Contracts (ECC)

Electrical & Electronics (EBG)

Machinery & Industrial Products (MIPD)

Information Technology & Engineering Services

Subsidiaries of the company:

Engineering & Construction

L&T-Valdel Engineering Pvt. Limited

L&T-Chiyoda Limited

L&T-Sargent & Lundy Limited

HPL Cogeneration Limited

L&T International FZE

Larsen & Toubro (Oman) LLC

Larsen & Toubro Electromech LLC (formerly Zubair Kilpatrick LLC)

L&T and Eastern Contracting LLC Joint Venture

Larsen & Toubro Readymix Concrete Industries LLC

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Larsen & Toubro Saudi Arabia LLC

Larsen & Toubro Qatar LLC

Larsen & Toubro Kuwait Construction WLL

L&T-ECC Construction (M) SND. BHD

L&T-RAMBOLL Consulting Engineers Limited

Voith Paper Technology (India) Limited

NAC Infrastructure Equipment Limited

L&T-HCC JV Jharkhand Road Project

L&T-KBL JV

HCC-L&T Purulia JV

L&T-AM JV

PATEL-L&T Consortium

International Seaports Dredging Limited (ISDL)

Metro Tunneling Group (MTG)

L&T Infrastructure Development Projects Limited

L&T Transportation Infrastructure Limited

L&T Western Andhra Tollways Limited (L&T WATL)

L&T Vadodara Bharuch Tollway Limited (L&T VBTL)

L&T Inter State Road Corridor Limited (L&T IRCL)

Narmada Infrastructure Construction Enterprise Limited (NICE)

L&T Western India Tollbridge Limited (L&TWIT)

Second Vivekananda Bridge Tollway Company Limited (SVBTC)

L&T Panipat Elevated Corridor Limited

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L&T Uttaranchal Hydro Power Limited

Seaports (Haldia) Pvt. Limited. (ISPHL)

Kakinada Seaports limited (KSPL)

The Dhamra Port Company Limited (DPCL)

L&T Urban Infrastructure Limited

Bangalore International Airport Limited (BIAL)

L&T Infocity Limited (LTIL)

L&T Infocity Lanka Private Limited (LTILPL)

L&T Infocity Infrastructure Limited (L&T IIL)

Vizag IT Park Limited (VIPL)

L&T Tech Park Limited

L&T Phoenix Infoparks Limited

Cyber Park Development & Construction Limited

L&T Arun Excello Realty Private Limited

L&T South City Projects Limited

L&T Vision Ventures Limited

CSJ Infrastructure Private Limited

L&T Crossroads Limited

Hyderabad International Trade Expositions Limited (HITEX)

Andhra Pradesh Expositions Private Limited

Machinery & Industrial Products company

L&T-Case Equipment Private Limited

L&T Komatsu Limited (LTK)

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Tractor Engineers Limited (TENGL)

Audco India Limited (AIL)

L&T-Demag Plastics Machinery Limited

EWAC Alloys Limited

Information Technology company

Larsen & Toubro Infotech Limited (L&T Infotech)

Insurance company

L&T Insurance

Financial Services Company

L&T Finance Limited

L&T International FZE

L&T Urban Infrastructure Limited

L&T Infrastructure Finance Limited

L&T Capital Company ltd. (LTCCL): Subsidiary Company

L&T Infrastructure Development Projects Ltd. (L&TIDPL): Subsidiary Company

References:
Note:Below are the references given on the wiki page https://en.wikipedia.org/wiki/Larsen_%26_Toubro
"Larsen and Toubro Balance Sheet, Larsen and Toubro Financial Statement & Accounts".
"Annual Report 2012-13" (PDF). L&T. Retrieved 3 December 2013.
Larsen & Toubro Ltd 171109.pdf

Shah, Shashank (2014-02-18). "Stakeholders Management in the Indian Construction Industry: Insights
into the Approach at Larsen & Toubros Construction Division". Journal of Values Based Leadership 7
(1). Retrieved 11 June 2014.
"Larsen & Toubro on the Forbes Global 2000 List". Forbes. 7 September 2012. Retrieved 3 December
2013.
"India's L&T looking overseas to beat local slowdown". Reuters. 21 November 2011. Retrieved 3
December 2013.
"L&T shares jump after Q2 beat, brokerages turn bullish". NDTV.com. 21 October 2013. Retrieved 8
December 2013.
"L&T wins The Economic Times 'Company of the Year Award - 2010'". L&T. 10 January 2011. Retrieved
3 December 2013.
"Larsen & Toubro Hydrocarbon Upstream". Retrieved 21 June 2012.
"(OIF), Joint Venture company formed by Larsen & Toubro Ltd. (L&T), India and SapuraCrest
Petroleum Berhad, Malaysia". Offshore International FZC. Retrieved 16 July 2010.
"Larsen & Toubro (L & T)". India Environment Portal. Retrieved 16 July 2010.
"MHI Receives Order for 3 Supercritical-Pressure Boiler/Steam Turbine Sets | Asia > South Asia from".
AllBusiness.com. 11 May 2010. Retrieved 16 July 2010.
"No.1 Construction Companies in World". No.1 Construction. Retrieved 10 August 2011.
"Larsen & Toubro.Its All About Engineering!". Tej Web World. 28 February 2010. Retrieved 16 July
2010.
"An address that is distinctly refined, exceptionally rare". epaperbeta.timesofindia.com. Retrieved 201601-15.
"L&T's 'youngest baby' shows growth in face of slowdown | Business Standard Mobile Website".
wap.business-standard.com. Retrieved 2016-01-15.
"Blackstone in talks with L&T realty to buy 1 million sq ft retail space - The Economic Times". The
Economic Times. Retrieved 2016-01-15.
"L&T commissions India's largest solar power plant". Retrieved 7 February 2013.
"L&T partners with Sharp to provide turnkey Solar EPC-targets 100MW in 12 months and turnover of Rs
13 billion". Retrieved 7 February 2013.
"L&T Infra bets on solar power". Retrieved 7 February 2013.
"L&T Infra raises $ 100 mn through ECB to fund solar projects". Retrieved 7 February 2013.

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Powered by Intergage www.intergage.co.uk. "Larsen & Toubro Limited (L&T)". Rina.org.uk. Retrieved
16 July 2010.
"L&T finally decides to retain its Mysore-based Medical Equip Biz | TopNews". Topnews.in. Retrieved 7
February 2013.
"Subsidiaries and associates". L&T. Retrieved 3 December 2013.
"L&T Komatsu Ltd". Komatsu Limited. Retrieved 10 August 2011.
Komatsu Limited
"Change name". Larsen&Toubro. Retrieved 10 June 2013.
"L&T to buy out Komatsu subsidiary in joint venture". Economic Times. 13 April 2013. Retrieved 13
April 2013.
"Overview". Larsen&Toubro. Retrieved 10 August 2011.
"L&T to restructure biz into 9 verticals". business Standard. 24 January 2011. Retrieved 10 August 2011.
"International Tractors Ltd signs pact with L&T Finance for vehicle loans". The Economic Times of
India. Retrieved 22 April 2014.
"Average AUM". Association of Mutual Funds in India. Retrieved 8 December 2013.
http://www.npcil.nic.in/pdf/press_lnt_jv.pdf
V. Rishi Kumar. "L&T Hyderabad Metro wins infrastructure award". The Hindu Business Line.
V Rishi Kumar. "Hyderabad metro to boost transit-oriented development". The Hindu Business Line.
Viswanath Pilla. "L&T begins leasing commercial space along Hyderabad Metro". livemint.com/.
"L&T to Develop Commercial Space Around Hyderabad Metro".
"L&T plans 8 malls on metro route". The Times of India.
IANS (10 June 2015). "L&T to develop commercial space with Hyderabad Metro".
http://profit.ndtv.com/stock/larsen-&-toubro-ltd_lt/reports

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L&T ECC
Although L&T is a conglomerate with so many subsidiaries and divisions the most important and the
biggest division of the conglomerate is the engineering, construction and contracts division which is
called L&T ECC. It was formed in 1946 and as such it is one of the oldest companies of the Indian
Construction Sector. By the number of orders and the revenues it is the biggest construction company of
India. With 2014 revenues 0f almost 60000 crores it is the most important contributor of L&Ts revenues
and profits. L&T Construction, India's largest construction organization is ranked among the world's top
30 contractors. For the last seven decades L&T ECC has been engaged in nation building completing
projects of various natures encompassing various segments and sectors. The company's capabilities span
the entire gamut of construction - civil, mechanical, electrical and instrumentation engineering - and its
services extend to all core sector industries and infrastructure projects. Many of the country's important
landmarks - edifices, structures, airports, industrial projects, flyovers, viaducts, water and power
infrastructure projects, highways, metro projects, bridges, real estate projects are made by L&T ECC.
L&T Construction straddles six related businesses:

Buildings & Factories

Transportation Infrastructure

Heavy Civil Infrastructure

Power Transmission & Distribution

Renewable Energy

Water & Effluent Treatment

Smart World & Communication

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EXTERNAL AUDIT FOR L&T CONSTRUCTION

Indian Construction Industry
The construction industry is the second largest industry of India after agriculture and accounts for 11
percent of Indias GDP. Indian construction industry employs 35 million people and its total market size is
estimated at US$ 126 billion. There are mainly three segments in the construction industry- first one
being real estate construction which includes residential and commercial construction like offices;
infrastructures construction which includes roads, railways, power plants, dams etc; and industrial
construction that consists of oil and gas refineries, pipelines, textiles etc. While the construction activities
in India are largely fragmented , there are only about 250 firms employing more than 500 people. The
construction industry works on the basis of contractual agreements. Over the years different types of
contracts have come into the industry. The nature of contract mainly depends on the size and the nature of
work, special design needs of the project like whether energy needs are fulfilled using renewable or non
renewable resources, annual requirements of funds and equipments and complexities of job.The industry
has a mix of organised and unorganised players in all sub-sectors including everyone from construction
labours to supervisors, contractors and material manufactures/suppliers etc. .There are only a few major
companies which are involved in the construction activities across all segments and sectors and there are
medium-sized companies who specialize in niche activities and finally there are small and medium
contractors who work on the subcontractor basis and carry out the work in the field. In 2011, there were a
few over 500 construction equipment manufacturing companies in all of India. The construction sector is
labor-intensive which includes engineers, managers and support staff and finally including indirect jobs,
the sector provides employment to more than 35 million people.
Referrences:
Note:Below are the references given on the wiki page
https://en.wikipedia.org/wiki/Construction_industry_of_India
Public information published by Construction Industry Development Council, Planning Commission of
India, Ministry of Statistics and Programme Implementation and writers original works.

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1.

India's Construction Equipment Manufacturing Industry Report

2.

"OVERVIEW OF THE CONSTRUCTION INDUSTRY IN INDIA" (PDF).

3.

http://www.indianconstructionindustry.com/overview.html

Analysis of the Macro Environment

Using PESTEL framework I will try to do an external audit of the company considering the Indian as well
as the external scenario.

Political Environment

SEZ act to boost infrastructure development The concept of Special Economic Zones has
gained huge popularity and government support. More and more number of Special Economic
Zones are coming up as a result of Government Policy. Currently around 200 SEZs are there in
India. Now all these SEZs call for heavy infrastructure development and thus there comes the
need of construction companies to develop plants, offices and other infrastructural facilities and
thus heavy investments are pouring in these SEZs.
Reduced Cement Prices and other reduction in rates- The cement prices have decreased
recently for State Infrastructure Projects recently. Also reduction in CST and freight rates of
diesel will also be a good positive factor leading to reduction in the expenses for the construction
companies.
FDI opportunities increased in the construction sector- With the stress on economic growth
and focus on the infrastructural development of the country the government has decided to
increase the FDI in the construction sector. Thus the recent amendments by the government have
made the access to capital much easier. Developers can raise capital in the international market as

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well. Thus the companies can go for larger projects which were earlier left due to lack of capital.
Ultimately projects meeting international standards can be built in the country.
Real Estate Investments Trusts to have positive affect Real estate mutual fund and Real
Estate Investments Trust will enable the small investors to invest money in the sector with as low
as Ten Thousand Rupees. Now these small investments will further bring a boost to the
construction sector ultimately more capital means more and more number of projects can be taken
up in the future.
Economic Environment
Growth in Construction activity causing Economic growth- With the increase in the
construction activities throughout the country and in different sectors economic growth is bound
to happen. Now this works both ways. With more infrastructure development more economic
growth occurs and with economic growth the opportunities for bringing in investments for the
construction activities also. India has seen around 7-8 % economic growth in the last 7-8 years
and since construction is the biggest component of the GDP, this growth in GDP will boost the
construction sector.
Inflation and Interest rates- Though the inflation rates have gone up in the past 5 years the
effect of this is not that visible in the construction sector. With more and more projects coming up
because of need of infrastructure development the industry seems to grow modestly in the near
future.
Smart cities program and Make in India policy- The government is very keen to build smart
cities and for this purpose more than 50 cities have been chosen which will be needing
infrastructure development. This again calls for new projects in the country and thus more and
more demand will be created in this sector. Also the Make in India policy of the current
government will create need to build more industrial infrastructure which is good for the
construction industry.

Social Environment

Shifting consumption pattern As India is progressing there is shift in the consumption pattern
from food and beverages to other things. As such the attitude towards life is changing for India.
This shift in the consumption pattern creates demand for new products and services which
ultimately leads to the boost to the industry infrastructure and demand for construction industry.
Rising Urbanization- Rising urbanization in the country is a very significant growth factor for
the construction industry. With more cities need for sanitation, roads, electricity distribution,
transportation, sewage system arises and for this infrastructure is needed which creates demand
for the construction industry.
Green Building infrastructure In the current scenario there is a need to go for Green Building
to save the environment and also to conserve the resources. In India there is a tremendous
potential for construction of green building in India. The estimated market potential for green
building will be about $ 400 million in 2010.

Technological Factors

Improvement in the technology - India there is huge scope to improve the technology used in
the construction sector. It includes both the construction activities and the construction materials.
Due to the obsolete technology the projects have to face unnecessary extra costs and sometimes
overruns also. Upgrading of the technology is required to increase the efficiency and productivity
of the sector.

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 Project Management Incompetency The industry faces issues with project management
incompetency which is caused mainly due to lack of coordination and communication existing in
the industry. The managers are sometime not well aware of the modern IT systems prevalent in
the world which can help in better communication and project management.
Low worker motivation In India the labour force is not that productive when you compare it to
the labour forces around the world. The labours are mostly illiterate and are not motivated to
work with full efficiency. This deficiency of motivation also leads to the projects getting delayed.
Also the systems required to manage the labours are also outdated.
Ready Mix Concrete In India Ready Mix Concrete is getting popular steadily. With the use of
Ready Mix Concrete the companies can save time and in some cases money also. This leads to
more revenues and decrease of cost incurred in the project. The use of Ready Mix Concrete
should be encouraged more and more in the coming future.
Environment Factors- All the major industries have the social responsibility of becoming
environmentally responsible with their operations. So for this industry the amount of wastes the
projects produce and the emissions from the construction equipments and the construction
vehicles cause environmental pollutions.
Legal Factors The construction industry faces the issues of the project overruns. In such times
the contract conditions have to be properly taken care of. Also the legal factors related to
following the safety norms and the environment norms will play a major role in the future how
the companies will perform in the future.
References:
https://www.scribd.com/doc/35534673/L-T-project

Porters five Forces for the construction industry

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Low threat of entrants The industry faces low threat of entrants because of the following
factors:
Economies of Scale In this Industry which is highly capital extensive it is difficult to
attain economies of scale and after a lot of projects you can attain profit margins at
minimal cost. Because of this reason the industry requires a lot of resources to start with
for a new entrant. And thus this hinders the entry of new players in the competition.
Labour Intensity - This industry requires a lot of man power. Not only in the technical
side including the executives and the engineers, other support staff but majorly the
labours to work on the field. But in this present scenario it is very difficult to find a good
labour contractor who can provide good labours at good rates. The industry is facing a
labour crunch. Now this factor acts as a hindrance for the new entrants to enter the new
industry and get revenues to continue in the long run.
High Capital Requirement This industry is highly capital extensive. You need money
for the construction equipments, money for the construction material, money to pay the
labour contractors, money to pay the engineers, managers and other support staff .Thus it
becomes difficult for a new player to collect that much capital when he enters the market.
The execution if delayed will definitely cause losses. Thus high capital requirement
makes it difficult for new entrants to enter the industry.
Lack of knowledge and experience It is not easy for a new player to match the
knowledge and the experience of an existing player. With more and more projects
companies learn how to manage projects and gradually earn the inputs required for
different types of projects. A new player does not have the experience of different
projects. Also he does not have the proper skilled technical workforce for the different
projects and thus it is a hindrance for him.
Access to input and market - A new Player will find difficulty to find materials,
machinery and labour at less prices hence it is difficult for him to earn the beginning
margins in the start of his venture and also being a new player clients will have less trust
on his ability to execute projects in time with all standards met.
Suppliers Bargaining Power- The industry has lots of suppliers when it comes to the
construction materials like cement, reinforcement bars, safety equipments etc. So a construction
firm has a lot of options to go for when it comes to buy the construction materials. However the
cost of the construction materials has been increasing thus in terms of the cost the construction
firms have to face issues. As such bargaining power of the materials suppliers is low. But when it
comes to labour force the number of labour contractors are low in the country and as such the
construction companies face a labour crunch all the time thus these subcontractors have a fair
amount of bargaining power.
Customers Bargaining Power- The clients have moderate to high bargaining power because
they have lots of information for decision making. As such there are good number of players who
can take up projects of different magnitudes and costs so buyers have options to choose from and
thus have their power in making choices. In most of the projects Govt is the client and Govt has
the say in payments and setting up most of the terms and conditions of the contract.
Threat of Substitutes- Within the industry the scope of innovation always lies. When it comes to
materials, substitutes exist of almost all the existing materials and thus companies can face issues
because of them. Also the technology used in the construction can go obsolete at any point of
time because of the new inventions. Thus the technology providers have some bargaining power
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in this industry because if a competitor finds a better technology which is less time consuming
and low cost then he may be asked to switch over from the existing construction firm by the
client. Also there lies the probability that after a project is completed the client or the
concessionaire may choose to go for a different contractor for the
maintenance of the structure.
Existing Rivalry among the competitors- Industry rivalry is high in the construction industry.
We have competitors like Gammon India, Simplex, Sapurji and Palonji who are able to provide
world class construction technology at comparable costs. These are also capable of taking
projects of different areas and sectors. Companies try to outbid others by giving lowest bids for
the projects. Also foreign players like Atkins Global also exist in the market which provides
world class and state of the art construction methodology and technology to compete with the
Indian firms. Also the number of projects offered by the government are increasing and a single
company cannot bid for every project thus the number of projects going to other companies will
increase.

References:
https://www.scribd.com/doc/35534673/L-T-project

Key competitors analysis of L&T

Gammon India - Gammon India Limited is one of the largest civil engineering construction
companies in India. The company is headquartered in Mumbai and it was founded in 1922 by
John C. Gammon. It has a history of some big and landmark projects in India such as Gateway of
India. It also has subsidiaries like L&T and it is capable of taking projects in different sectors like
infrastructure, real estate and industry.
Shapoorji and Palonji- It is another business conglomerate of India of which realty and
infrastructure development is one of the businesses. It also has subsidiaries like L&T and it is
capable of taking projects in different sectors like infrastructure, real estate and industry. It is the
first Indian construction company to get the ISO 9001 status.
Like these we have other companies like NCC ,HCC, Simplex Infrastructures LTD,ITD
Cementation Ltd., ,Afcons etc.

The construction industry has some major players like L&T, Gammon India, Shapoorji Palonji etc. which
all have their strengths and weaknesses. Each company has its own vision and mission and with some
core competencies they all try to be leaders of the Indian Construction Industry. Some companies have
their operations in some other countries but overall the scale of operations outside India is very low when
compared to and thus we will mainly focus on the Indian Scenario only.
If we consider the likes of Gammon India its core competency lies in undertaking complex projects and
projects which will be iconic in the future and completing them with the use of modern and sophisticated
technology and minimum resources. Also it has been one of the oldest construction firms in India. IT has
built historic structures such as Gateway of India and also it in into building infrastructure for all major
engineering and industry sectors and also the reals estate areas. Though profits and revenues are not as
high as L&T but definitely it has its presence in the industry.

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Similarly when we consider Shapoorji and Pallonji its core competencies lie in undertaking complex
projects and projects which will be iconic in the future and completing them with the use of modern and
sophisticated technology and minimum resources. It has its another construction arm AFCONS which is
another big name in the construction industry. Also Shapooji and Pallonji has many subsidiaries and
divisions and is a conglomerate thus it gets orders from its subsidiaries itself. Also its clientele include
government organizations and both Indian and foreign companies of different sectors.
If we consider DLF its core competency lies in its real estate operations .It is the largest real estate
company of India. The large geographies, businesses and segments in which it has its operations protects
itself from the impact of economic cycles. Also a strong management arm of the organization helps in
running the organization with high revenues and low costs and good management also win more and
more orders.
If we consider Simplex Infrastructures Limited it was named as Simplex Concrete Piles earlier. Therefore
the company is famous for the pile foundations which is a type of foundations. Now in the structures
where piles foundations are used Simplex Infrastructures is one of the very famous options for the
developers and the clients. It is also a very old company as it was formed in 1924 so it also enjoys a brand
value although that is not comparable to L&Ts .Its skills include skilled labour force, economies of scale
and ability to take up projects of different segments and sectors like real estate, power plants ,highway
projects.
L&T faces stiff competition from these players because these players have been old in the construction
sector so they have the capital to take up projects in varied sectors and segments.The use of modern
technology and resources in not alien to these players.Most of these players have access to world class
equipments, bid low for the government tenders and are gaining expertise and knowledge in the varied
sectors of engineering and construction.Many have their own subsidiaries and divisions because of which
the revenues of those subsidiaries can be used in this capital extensive industry.Ma ny players have
entered into joint ventures with other industries and companies from foreign so that they use that
cooperation to find capital for big projects and complete them using their technology.

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2014 revenues of top construction companies( in Rs.Crores)

40000
35000
30000
25000

2014 revenues of top

construction companies(
in Rs.Crores)

20000
15000
10000
5000
0

Source : www.moneycontrol.com

INTERNAL AUDIT of L&T ECC

SWOT ANALYSIS

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Strengths:

Strong Name: The strong name of L&T E&C is a very big strength for the company. The
Engineering and Construction arm has been in operation since 1944.Since 1944 this arm has
completed numerous construction and infrastructure projects throughout the country and even
abroad such as in the Middle East countries. So this reputation has not built in a matter of months
or years. Decades long experience into being a Engineering And Construction Contractor causes
L&T to win more and more contracts and hearts of the people and their clients. Thus we can say
that this is one of the foremost strength of this company.

Covers entire gamut of construction- The Company has successfully completed projects in
different areas of construction in the past. If one considers the areas like civil, mechanical, and
electrical and instrumentation engineering L&T has executed projects in them in the past.
Because of this ability and the resources to execute projects in all the areas including the ability to
handle multiple projects at one time L&T can continue to get projects in the future and
successfully complete them and remain the industry leader.

Largest Construction Company of India- By revenues and the number of orders it is the largest
construction company of India. So this itself is one of the biggest strengths of L&T. This is also
attracting more and more orders from the developers and the clients.

Operations in Foreign Countries- L&T ECC also has operations in countries other than India.
So this brings additional orders to its order books. These orders bring additional revenue to the
company. Also this brings world recognition and presence to the company. This increases the
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respect and recognition of the company and that again help in bringing more and more orders to
the company.

Skilled Employees- L&T has one of the most skilled workforce in the construction industry. If
you consider the technical workforce the employees are learned with diplomas and degrees in
civil engineering and other engineering fields and the labour force employed by the company is
also efficient when compared to the labor force of other construction companies.

Ability to take up projects in different sectors-L&T has the expertise and the experience of
executing projects in various segments like highways, power plants, hydel plants, real estate etc.
So this is one of the biggest strength of the company as with this expertise and knowledge L&T
can execute orders in time with least amount of resources and also the difficult projects requiring
expert engineering and execution techniques can be done by L&T.

Very high standard safety and environment practices- L&T follows very high standard safety
and environment practices. Due to which the number of accidents occurring at the site is very
low. Also the environment practices ensure that the environmental pollution is minimum.

Large capital base- Because of the large capital base the company can take up more projects and
projects that require very high initial investment .

Weaknesses:

Workforce leaving company- In spite of the greatness of the company employees have been
leaving the company because of the heavy work hours and low salaries and slow promotion
opportunities. So this is one of the weaknesses of this great firm.
Economies of Scale- L&T has not achieved economies of scale in spite of its long duration of
operations and heavy revenues. This is one weakness which may cause company to loose some of
its orders in the future.
Project overruns- Sometimes the company has not been able to complete the projects on time
leading to penalties and increased cost of operations. Now this factor has a multifold effect.
Companys profits gets reduced due to this and also the planning of the nest projects and they are
able to start on time or when projects share resources other projects other projects also get slow.
Too much expansion related problems- When the operations of the company are in many
countries or segments coordinating related problems arise.This are caused due to lack of
coordination between the offices of various sites or the corporate offices.

Opportunities:

Projects coming up in other countries L&T has opened up offices in countries other than
India also. Since the opportunities exist in other countries as well to expand this can be a very
favorable scenario in the future. L&T is already working a lot in the gulf countries like Oman,
Qatar etc .Need is to find more opportunities in other countries.
Joint Ventures- L&T has entered into many joint ventures like one with Komatsu. With this
venture L&T has got access to world class equipments at better deals. Similar joint ventures made

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by L&T in the past has brought more and more projects and revenues. The idea is to use these
joint ventures to bring more and more growth for the company.
Subsidiaries of the L&T conglomerate- L&T has so many subsidiaries. All these subsidiaries
want to expand and maintain themselves. So all these orders will come to L&T ECC itself. So the
subsidiaries of the group are also the opportunities for the ECC division.
Infrastructural boost and stress by the government- The government is laying high stress on
the growth of the country and getting that 8%-9% growth rate back. For this growth to happen the
infrastructure of the country has to be improved. Thus government is planning to spend more and
more on infrastructure. This presents many opportunities for the ECC division to win many
tenders and projects in the future.
Smart cities coming up- The government is planning to come up with many smart cities pan
India. This initiative requires infrastructure development thus the construction sector will get
further boost because of spending by the government on smart cities.

Threats:

Competitors: The company faces stiff competition in the country because of the presence of
many competitors like Gammon, Simplex etc. Because of these players also getting orders L&T
might lose market share and revenues.
Competition in the outside India geographies: Larsen & Toubro faces stiff competition in the
international geographies with big construction majors in the Middle East countries. We have
examples of ABB of Sweden and Bechtel of the US. Stiff competition can erode the company's
market share and reduce its profitability.
Rising cost of materials- Every year the cost of construction materials is increasing which can
reduce the profitability of the company in the future by increasing the cost of the operations
Rising cost of working capital- Cost of working capital is increasing as the interest rates on the
working capital is increasing. This will have effect on the companys profits and ability to take up
new projects.

References:
https://www.scribd.com/doc/35534673/L-T-project

As of now ECC has the highest revenue among the construction companies of India.Year on year the
division along with the entire group has experienced surge in the revenues and the profits.But the cost of
the working capital has increased in th e recent years.When you consider the number of contracts or
orders that too has increased year on year for the company in the recent years.
The company did a major restructuring few years ago because of the substantial growth previously to
handle the company more effectively.The four parts were namely Buildings & Factories, Infrastructure,
Power Transmission & Distribution and Mineral Metal & Water .Through this restructuring the company
operations got new directions.

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Vision:

Source: www.larsenntoubro.com

Mission: To become the global leader in the technology and engineering field
Resources & Capabilities
Financial Resources Firms ability to generate funds and its borrowing capacity
L&T ECCs ability to generate funds is huge and is inherent due to the nature of the industry and the size
of the company itself. So the revenues of the group has been increasing which also is beneficial for ECC.

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L&T groups EBITDA,PBT and PAT and Total assets growth in the last 5 years
Source: http://www.moneycontrol.com/financials/larsentoubro/financial-graphs/total-assets/LT
http://www.moneycontrol.com/financials/larsentoubro/financial-graphs/ebidta-pbt-pat/LT

Organizational Resoucres: L&Ts organizational structure is veru efficient which has led to
maximum colloboartion and coordination netween the various divisions and subsidiaries of the
conglomerate and ECC division bears the fruit of this efficient organizational structure.
Physical Resources Sophistication and location of a firms plant and equipment

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L&T ECC has world class equipments and construction machineries and it is in the practice of
constantly maintaining its resources which ultimately help in the operations of the firm and help
in minimizing the cost of operations and timely completion of the projects.
Technological resources Stock of Technology such as patents, trademarks, copyrights, and
trade secret
L&T uses world class resources on the site and the construction methodology used is according
to the code of conducts as prescribed by the Indian Standards
Human Resources The companys greatest strength liess in the people.Propmotions are
entirely based on merit. Every employee is driven to work with focus and utilize their talent to
pace their growth as they want in the organization. It expects its employees to take personal
responsibility to ensure and follow the global safety and health guidelines of the company, for the
benefit of everybody associated with the organization. Mission is strictly followed by all
employees in accordance with the Dream, People & Culture policy.
Innovation Resources- The company believes in innovation which should be encouraged on a
regular basis. Innovation in construction methods of project management is encouraged on a
regular basis.
Reputational Resources- L&T has a high reputation of focusing highly on work and stretching
too far. However, this does pay dividends purely from a business and societal point of view as it
creates huge value for everyone involved. The company has the reputation of completing big
projects on time with minimum costs and also following the industry standards efficiently and
following the safety and environment practices to the word.

CORE COMPETENCIES
Mergers & Acquisitions
M&A gives L&T economies of scale and improves cost efficiencies in the system. This is one of the main
reasons why it has continued to remain No. 1 in the Indian technology and engineering sector and earn
maximum profits.
Timely completion and Cost efficiency
L&T has the core competency of completing big projects on time with the minimum amount of resources.
IT is able to do it because cost efficiency is followed till the lowest level. Regular maintenance of the
equipments, site visits proper site and proper site management leads to this core competency.

Following Industry Standards and safety and environment practices

This is also one of their core competencies because of which they have built their reputation and this also
leads to timely completion of their projects and cost minimization because money wasted on repairs is
saved.

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Value Chain Analysis

The company has excellent infrastructure in terms of equipment or offices.HR resources are also good,
The company is spending on training the company and the subcontractor labour force through their
training programs. The logistics of the company is highly efficient when it comes to procuring the
construction raw materials. There is no time lag between demand and supply.The operations of the firm is
extremely efficient as we have already said that the company has the core competency of executing
products in time with least amount of resources.

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Finding of the FIT without missing the Strategic Intent

We have already covered the industry analysis in the external audit, where we used 5 forces model to
cover suppliers, customers, rivals, entrants and substitutes. Then in the Internal Audit we covered the
strengths, weaknesses, threats and the opportunities and value chain and the resources of the company. In
view of these we have used TOWS analysis to suggest further strategies for L&T ecc.

TOWS ANALYSIS
The TOWS analysis forces companies to define their internal factors as opposed to their external factors.
The external factors are the opportunities and threats that the company faces within the market whereas
strengths and weaknesses comprise the internal factors.

SO strategies:

The company should use the already started foreign operations to tap on the opportunities present
in the outside market..In the gulf countries the company is already into many projects. So the
already made presence and the reputation of the company in these markets should be built upon
to further get more contracts and projects in the outside markets.
The existing subsidiaries which are quite diverse should be used to get into more and more joint
ventures and thus through these joint ventures more and more orders can be obtained,. Also the
assets of the company will increase and through them the company can be more efficient and
effective in their operations.
The strength of the ECC division is to execute the projects on a timely basis with the minimum
amount of resources involved. Now the subsidiaries have to expand or need maintenance and this
work will be given to the ECC division.So this opportunity can be met by this strength of the
company.
Since the govt is spending more and more on infrastructure and smart cities so this is the golden
time for the ECC division to raise capital for winning more and more contracts and using its core
competency to execute the projects and earn revenues.

WO strategies:

Using the subsidiaries work force the crunch of the labour force in the ECC division can be met.
Also the government will be spending on infrastructure so that money when taken for the projects
can be diverted to attain the economies of scale and buy more construction equipment to prevent
the project overruns and get cost minimization.

ST strategies:

We have competitors coming up but if ECC uses and remains firm on its competency of
executing the projects in time with minimum amount of the resources the threat of losing business
to competitors can be minimized.
L&T when follows the industry standards and safety and environment practices to the word can
always prevent wastage of money and resources. This prevention of wastage and cost

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optimization can always help fight with the rising cost of construction materials and construction
equipments.
L&T should use its reputation and core competencies to win and complete more and more
projects abroad and thus gaining the revenues maximized in those geographies also. Once the
projects get executed efficiently the company will get the clients and the government support
there also.
It should also seek for government support for doing business in those countries, For this CSR
activities should be promoted in those countries. Because if the government finds that the
company is more and more interested in their countrys growth they will also support the
companys ventures.
Rising cost of working capital is something which is beyond the companys control because it
cannot control the interest rates but it can always go for cost optimization to reduce costs of
operations.

WT strategies:

Go for more joint ventures when required to increase the asset base and get more and more
projects and contracts to increase the revenues.
Carry on the core competency of executing the projects on time with minimum amount of
resources to keep up the reputation and win more and more projects and revenues.
The company should increase the salaries of the employees and also change the HR policy of
promotion so that people dont leave the company. The training programs should be overhauled
so that employees personal value addition increases.
Cost optimization and waste reduction should be practiced at the lowest level to decrease cost of
operations and project decisions should be taken carefully to attain the revenues and the
economies of scale.
Proper Project Management techniques should be implemented and routine site checks should be
made so that project overruns are prevented.
The groups organization structure has to be overhauled so as to increase the coordination among
the so many subsidiaries and divisions of the company.

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Conclusion
The primary purpose of the report was to study the environment, both internal and external for L&T D
and then find out the fit for the firm without missing the strategic intent. For understanding external
environment, different components of external environment were studied. These are demographic
environment, economic environment, political and legal environment, technical environment, social
environment, global environment, industry environment and competitive landscape. Also to understand
the construction industry better Porters 5 forces framework and an overview of some of the major
competitors of L&T ECC was done. Also for studying the internal framework of the company an
understanding of the core competencies of the company was done by using the SWOT analysis and then
the various resources of the company were discussed followed by the value chain analysis of the
company.
This enabled us to understand the exact position of the firm in the current scenario from where the future
course could be decided. The environment both external and internal was analysed in the report and it was
concluded that L&T ECC is moving ahead in the right direction with respect to strategy and is in the right
fit. Some of the future improvements they can make to their strategies are mentioned by analysing their
SWOT analysis in the form of a TOWS matrix. These include many like starting to focus on the foreign
markets, going for joint ventures ,Laying stress on cost optimization and prevention of wastage of
resources, going for more CSR activities both in India and abroad to get the government support, going
for organizational overhaul to get more coordination in the subsidiaries and divisions etc. Currently L&T
is the biggest and the most reputed construction company in India and also finds position within the top
30 construction companies of the world and according to me the company has the enough potential to
improve and with the future strategies and the vision and mission in mind they can remain at the top for a
long period of time.

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