mot suzlon a8

SuzlonManagement of Technology

Group: A8

Abhishek Anand

Amitesh

Ravi Baranwal

Sanjay Kumar

1*EMNE CATCH-UP STRATEGIES IN THE WIND

TURBINE INDUSTRY: IS THERE A TRADE-OFF BETWEEN

OUTPUT AND INNOVATION CAPABILITIES? SNEHAL

AWATE,1 MARCUS M. LARSEN2, and RAM MUDAMBI1

Agenda• About Suzlon• Strategy Intent of Suzlon• Methods: Technology Benchmarking

– Turbine Size– Patents Filed– Financial Benchmarking

• Methods: Technology Capability Ladder of Suzlon• Business Strategy, Sourcing Management, Business Model• Internal & External

– Strengths– Risks & Concerns

• Critical Success Factors• Finding Technology Gap, RCD• Suggestions





About Suzlon• Suzlon Energy Limited, is an Indian wind power company based in Pune,

India

• In terms of market share, in 2011 the company was the fourth largest wind turbine manufacturer by cumulative installed capacity worldwide with approaching 20,000 MW of installations in 28 countries

• Suzlon consists of Suzlon Energy Limited (SEL), India, (The Company) and 78 subsidiaries (13 Indian and 65 international). Suzlon is present in 33 countries across six continents: North and South America, Asia, Australia, Europe, and Africa

• With headquarters in Pune, it has several manufacturing locations in India. There are also locations in mainland China, Germany and Belgium.

• Suzlon is listed on the National Stock Exchange of India and on the Bombay Stock Exchange of India

*EMNE CATCH-UP STRATEGIES IN THE WIND




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Strategy Intent of the company

• To be the technology leader in the wind sector• To be in the top three wind companies in all the key markets of the

world• To be the global leader in providing profitable, end-to-end wind

power solutions• To be the 'company of choice' for stakeholders• Inorganic growth through acquisitions• Providing cost-competitive solutions





Methods: Technology Benchmarking

• Associations exist between Technology Acquisition Mechanisms

– Levels of Technology Upgrading (measured by increased turbine size)

– Catch-Up (measured by decreased distance to the world technology frontier based on turbine size).

*EMNE CATCH-UP STRATEGIES IN THE WIND TURBINE INDUSTRY: IS THERE A TRADE-OFF BETWEEN OUTPUT AND INNOVATION CAPABILITIES? SNEHAL AWATE,1 MARCUS

M. LARSEN2, and RAM MUDAMBI1

5

Why Turbine Size for Benchmarking?

• The output of a wind turbine is primarily dependent on two things

– The amount of fuel available (wind resource) – The size of the collector utilized to harvest that fuel (swept area

of the rotor)

• The amount of energy that can be extracted at a given wind speed is proportional to the size of the rotor

*EMNE CATCH-UP STRATEGIES IN THE WIND TURBINE INDUSTRY: IS THERE A TRADE-OFF BETWEEN OUTPUT AND INNOVATION CAPABILITIES? SNEHAL AWATE,1 MARCUS M. LARSEN2, and RAM

MUDAMBI1

6

Model Capacity Blade †hub ht† total ht area swept rated *length* by blades wind §speed§

GEGE 1.5s 1.5 MW 35.25 m 64.7 m 99.95 m 3,904 m2 12 m/s GE 1.5sle 1.5 MW 38.5 m 80 m 118.5 m 4,657 m2 14 m/s

Vestas

Vestas V82 1.65 MW 41 m 70 m 111 m 5,281 m2 13 m/s Vestas V90 1.8 MW 45 m 80 m 125 m 6,362 m2 11 m/s 105 m 150 m Vestas V100 2.75 MW 50 m 80 m 130 m 7,854 m2 15 m/s 100 m 150 m Vestas V90 3.0 MW 45 m 80 m 125 m 6,362 m2 15 m/s Vestas V112 3.0 MW 56 m 84 m 136 m 9,852 m2 12 m/s

Gamesa Gamesa G87 2.0 MW 43.5 m 78 m 121.5 m 5,945 m2 c. 13.5 m/s

Siemens

Siemens 2.3 MW 46.5 m 80 m 126.5 m 6,793 m2 13-14 m/s Bonus (Siemens) 1.3 MW 31 m 68 m 99 m 3,019 m2 14 m/s Bonus (Siemens) 2.0 MW 38 m 60 m 98 m 4,536 m2 c. 15 m/s Bonus (Siemens) 2.3 MW 41.2 m 80 m 121.2 m 5,333 m2 c. 15 m/s

Suzlon

Suzlon 950 0.95 MW 32 m 65 m 97 m 3,217 m2 11 m/s Suzlon S64 1.25 MW 32 m 73 m 105 m 3,217 m2 12 m/s Suzlon S88 2.1 MW 44 m 80 m 124 m 6,082 m2 14 m/s Repower MM92 2.0 MW 46.25 m 100 m 146.25 m 6,720 m2 11.2 m/s

*EMNE CATCH-UP STRATEGIES IN THE WIND TURBINE INDUSTRY: IS THERE A TRADE-OFF BETWEEN OUTPUT AND INNOVATION

CAPABILITIES? SNEHAL AWATE,1 MARCUS M. LARSEN2, and RAM MUDAMBI1

7

Patents Comparison (Proxy for R&D investments)

*EMNE CATCH-UP STRATEGIES IN THE WIND TURBINE INDUSTRY: IS THERE A TRADE-OFF BETWEEN OUTPUT AND INNOVATION CAPABILITIES? SNEHAL AWATE,1 MARCUS M. LARSEN2, and RAM MUDAMBI1

8

Financial Benchmarking

COGS as percentage of Revenue

COGS as %age for Suzlon has decreased compared to other firms






Revenue on Asset

Revenue on Asset has increased for Suzlon 10*EMNE CATCH-UP

STRATEGIES IN THE WIND TURBINE INDUSTRY: IS THERE

A TRADE-OFF BETWEEN OUTPUT AND INNOVATION

CAPABILITIES? SNEHAL AWATE,1 MARCUS M.

LARSEN2, and RAM MUDAMBI1


• Return on Asset

Loss in recent years. Financially weak position





Technology Capability Ladder of Suzlon

• Technology acquisition mechanisms : Affects Technology Upgrading and Technology Catch-Up

– Production licenses from foreign wind turbine companies (associated with Lowest Technology Level)

– Domestic R&D: In-house R&D by firms– Joint venture with a foreign manufacturer– Joint design with a foreign design firm (associated with

Highest Technology Level)

12*EMNE CATCH-UP STRATEGIES IN THE WIND TURBINE INDUSTRY: IS THERE A TRADE-OFF BETWEEN OUTPUT AND INNOVATION CAPABILITIES? SNEHAL AWATE,1 MARCUS

M. LARSEN2, and RAM MUDAMBI1


Technology Adoption phase• 1995: Technical collaboration agreement with Südwind having considerable

knowledge on the technology of the wind turbines to gain engineering knowledge and to sell turbines in India

Technology Transfer and Absorption phase• 1997: Acquisitions and licensing agreements with different European companies

whose knowledge and competencies encompassed the technology frontier in wind turbines - Suzlon accessed and integrated the required industry expertise

• 2001: – Acquisition of AE-Rotor Techniek BV provided Suzlon with specialized

knowledge in the design and manufacturing of rotor blades– Suzlon established a licensing agreement with Aerpac B.V., gaining access to

expert knowledge in rotor blade design– Manufacturing and marketing rights from Enron Wind to produce different

varieties of rotor blades in India and to have state-of-the-art production line and technical support (Lewis, 2007)






• 2002: Acquisition of the German company AX 215 Verwaltungsgesellschaft mbH to establish an R&D unit in Germany

• 2004: Joint venture with Austrian company Elin Motoren GmbH to manufacture generators in India (Red Herring Prospectus, 2005)

• 2006: Acquisition of the Belgian company Hansen Transmission International, the second largest gearbox manufacturer in the world in to gain knowledge on manufacturing of gearbox and drive trains for wind turbines.

• An arrangement with Winergy AG, the leading gearbox supplier in India, which allows for the use of domestically manufactured gearboxes, while it continues to work to advance its own technology.

• 2007: Acquisition of Repower Systems AG, for its broad product portfolio, which included the larger offshore wind turbines.






Design & Engineering - R&D phase

• Suzlon’s R&D center in Rostock, Germany, develops mechanical and electrical systems incorporated in the wind turbine nacelle, hub, and tower

• In Netherlands, the company’s R&D center focuses on aerodynamic and rotor blade structure development as a continuation of the acquisition of AE-Rotor Techniek BV and Aerpac B.V

• The R&D center in Belgium focuses on gearboxes in accordance with the acquisition of Hansen Transmission

• This combination of licensing arrangements with foreign firms and internationally based R&D and other facilities, has created a global learning network for Suzlon, customized to fill in the gaps in its technical knowledge base*

*EMNE CATCH-UP STRATEGIES IN THE WIND TURBINE INDUSTRY: IS THERE A TRADE-OFF BETWEEN OUTPUT AND INNOVATION CAPABILITIES? SNEHAL AWATE,1 MARCUS M. LARSEN2, and RAM MUDAMBI1

15

Business Strategy

*EMNE CATCH-UP STRATEGIES IN THE WIND




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Business Strategy• A fast-follower strategy of catching up to the technology frontier of the

industry

• A generalist output-oriented knowledge strategy by acquiring target firms whose competences and capabilities are of direct application to the production of the wind turbines (both wind turbine manufacturers and subcomponent suppliers)

• Vertical integration strategy by either setting up Greenfield manufacturing facilities, or acquiring different critical component manufacturers and technology providers so as to have complete control over the supply chain

• Most of Suzlon’s manufacturing facilities are still located in India, where the company has increased access to capital, and to low manufacturing and labor costs, giving it an edge over competitors manufacturing turbines in higher cost regions such as Western Europe.





Sourcing Management• Vertical integration provides strong control over critical components,

but implies the art of balancing different capacity requirements throughout the supply chain

*EMNE CATCH-UP STRATEGIES IN THE WIND TURBINE INDUSTRY: IS THERE A TRADE-OFF BETWEEN OUTPUT AND INNOVATION CAPABILITIES? SNEHAL AWATE,1 MARCUS M. LARSEN2, and

RAM MUDAMBI1

18

Business Model

*EMNE CATCH-UP STRATEGIES IN THE WIND TURBINE INDUSTRY: IS THERE A TRADE-OFF BETWEEN OUTPUT AND INNOVATION CAPABILITIES? SNEHAL AWATE,1 MARCUS M. LARSEN2,

and RAM MUDAMBI1

19

Internal Factors• Strengths

– A global production platform and access to an integrated manufacturing base

– Delivering enhanced value chain in wind energy markets– In house technology and design capabilities– Acting as a market leader in India and significant presence in other high

growth markets

• Risks and Concerns– Supply bottlenecks due to demand outpacing supply– Widespread global operations could impact operational efficiency,

especially if quality sites are depleted or scarce– Large scale acquisitions like that of Hansen Transmissions and Repower

Systems AG exposes Suzlon to financial risk in form of additional leverage and challenges in form of integration and management of business operations and systems, in retention of select personnel, and in coordination of sales and marketing efforts





External Factors• Strengths

– Extended coastlines that are ideal for harnessing wind power– Highly competitive wind energy cost in India due to the strength in

developing new technology while maintaining low labour costs

• Risks and Concerns– Decreases or eliminations of government subsidies relating to wind

energy in key markets– Competitors with longer industry experience who may be able to react

faster to trends and changes in customer demand. – Emergence of other sources of energy that are comparable to wind

energy in form of reduced cost and generation efficiency may also pose risk to wind industry in general and Suzlon in particular

– Competition from China, both in terms of securing sales in China and keeping up with rival Chinese producers





Critical Success Factors

• Technology– Capacity, Lifetime, Efficiency

• Manufacturing– Vertical Integration, Scale

• Brand name– Quality

• Access to capital– High initial investment





Finding Technology Gap

• Global Annual Wind Installed by Rated Turbine Capacity: 2010–2025






• Wind Energy Investments (2000 – 2030)






Technology Curve: Turbine diameter growth with time






• Problem Statement/Gaps– Lack of high generation capacity blades and off-shore

capability

• Root Causes– Strategic focus on improving efficiency and driving down costs

instead of cutting edge design*– Shallow and narrow knowledge base: Lagging behind in

innovation capabilities– Focus on own R&D and Technology Import via purchase

production license over Technology R&D Collaboration

*EMNE CATCH-UP STRATEGIES IN THE WIND TURBINE INDUSTRY: IS THERE A TRADE-OFF BETWEEN OUTPUT AND INNOVATION CAPABILITIES?

SNEHAL AWATE,1 MARCUS M. LARSEN2, and RAM MUDAMBI1

26

Root Cause Analysis





Suggestions

• Options

– Joint Design and R&D collaboration with other wind turbine manufacturers

– R&D and product development: Direct Drive Wind Turbine Design Vs Gearbox Design *

– Technological investment in• High generation capability turbines

• Offshore wind turbines

EMNE CATCH-UP STRATEGIES IN THE WIND TURBINE INDUSTRY: IS THERE A TRADE-OFF BETWEEN OUTPUT AND INNOVATION CAPABILITIES? SNEHAL AWATE,1 MARCUS M.

LARSEN2, and RAM MUDAMBI128

References• http://investing.businessweek.com/research/stocks/financials/financials.asp?

ticker=601558:CH• http://investing.businessweek.com/research/stocks/financials/financials.asp?

ticker=601558:CH&dataset=balanceSheet&period=A&currency=native• http://www.goldwindglobal.com/upload/files/201209/201209100925996.pdf• http://www.gamesacorp.com/recursos/doc/accionistas-inversores/informacion-

financiera/memoria-anual/english/annual-report-2011.pdf• http://www.moneycontrol.com/stocks/company_info/print_main.php





THANK YOU !!





mot suzlon a8

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