Question

Bharat Heavy Electricals Limited Concentrates on the Power Equipment Industry Bharat Heavy Electricals Limited (BHEL) is India’s largest engineering and manufacturing enterprise, operating in the energy sector, employing more than 42000 people. Established in 1956, it has established its presence in the heavy electrical equipment’s industry nationally as well as globally. Its vision is to be ‘a world class enterprise committed to enhancing stakeholder value’. Its mission statement is: ‘to be an Indian multinational engineering enterprise providing total business solutions through quality products, systems, and services in the fields of energy, industry, transportation, infrastructure, and other potential areas’. BHEL is a huge organization, manufacturing over 180 products categorized into 30 major product groups, catering to the core sectors of power generation and transmission, industry, transportation, telecommunications and renewable energy. It has 14 manufacturing divisions, four power sector regional centers, over 100 project sites, eight service centers and 18 regional offices. It acquires technology from abroad and develops its own technology at its research and development centers. The operations of BHEL are organized into three business sectors of power, industry and overseas business. Besides the business sector departments, there are the corporate functional departments of engineering and R & D, human resource development, finance and corporate planning and development. BHEL’s turnover experienced a growth of 29 per cent, while net profit increased by 44 per cent in 2006-07. BHEL has formulated a five-year strategic plan with the aim of achieving a sustainable profitable growth. The strategy is driven by a combination of organic and inorganic growth. Organic growth is planned through capacity and capability enhancement, designed to leverage the company’s core areas of power, supported by the industry, transmission, exports and spares and services businesses. For the purpose of inorganic growth, BHEL plans to pursue mergers and acquisition and joint ventures and grow operations both in domestic and export markets.

BHEL is involved in several strategic business initiatives at present for internationalization. These include targeting the export markets, positioning itself as a reputed engineering, procurement and construction (EPC) contractor globally, and looking for opportunities for overseas joint ventures. An example of a concentration strategy of BHEL in the power sector is the joint venture with another public enterprise, National Thermal Power Corporation, to perform EPC activities in the power sector. It is to be noted that NTPC as a power generation utility and BHEL as an EPC contractor have worked together on several domestic projects earlier, but without a formal partnership. BHEL also has joint ventures with GE of the US and Siemens AG of Germany. Other strategic initiatives include management contract for Bharat Pumps and Compressors Ltd. and a proposed takeover of Bharat Heavy Plates and Vessels, both being sister public sector enterprises. Despite its impressive performance, BHEL is unable to fulfil the requirements for power equipment in the country. The demand for power has been exceeding the growth and availability. There are serious concerns about energy shortages owing to inadequate generation and transmission, as well as inefficiencies in the power sector. Since this sector is a major part of the national infrastructure, problems in the power sector affect the overall economic growth of the country as well as its attractiveness as a destination for foreign investments. BHEL also faces stiff competition from international players in the power equipment sector, mainly of Korean and Chinese origin. There seems to be an undercurrent of conflict between the two governmental ministries of power and heavy industries. BHEL operates administratively under the Ministry of Heavy Industries but supplies mainly to the power sector that is under the Ministry of Power. There has been talk of establishing another power equipment company as a part of the NTPC for some time, with the purpose of lessening the burden on BHEL.

1) BHEL is mainly formulating and implementing concentration strategies nationally as well as globally, in the power equipment sector. Do you think it should broaden the scope of its strategies to include integration or diversification? Why?

2) Suppose BHEL plans to diversify its business. What areas should it diversify into? Give reasons to justify your choice.

answer must be 500 words and above

Answer 1

BHEL has taken up review of designs, specifications and procurement processes for ensuring quality and competitiveness and is consolidating and reinvigorating recent initiatives in defence and aerospace, water, e-mobility, batteries, renewables and transportation verticals.

BHEL manufactures over 180 products under 30 major productsgroups and caters to core sectors of the Indian Economy viz, Power Generation & Transmission, Industry, Transportation, Telecommunication, Renewable Energy, etc. The wide network of BHEL‟S 14 manufacturing divisions, four Power Sector regional centers over 100 project sites, eight service centres and 18 regional offices, enables the Company to promptly serve its customers and provide them with suitable products, systems and services efficiently and at competitive prices.

BHEL also shoulders its responsibility for Social Development of nearby areas by providing employment, opportunities , developing ancillary units, extending help to weaker sections, adopting village in the nearby locality etc.

The high level of quality & reliability of its products is due to the emphasis on design, engineering and manufacturing to international standards by acquiring and adapting some of the best technologies from leading companies in the world, together with technologies developed in its own research and development centers.

Revamp of project execution capabilities is another major initiative under way with the objective of arresting project delays and consolidating its position as a leading project execution organisation.

As part of the transformation strategy, the company has taken up the task of reviewing and revamping processes, redesigning business models, expanding into new markets/businesses and developing a committed workforce with a strong leadership pipeline at all levels. Specific strategic initiatives focus on Quality, Project Execution, Cost Reduction, Diversification, Digital Enablement, Technology upgradation. These initiatives are being coordinated and monitored through a ‘Transformation Office’ set up at the corporate headquarters.

Digital enablement is another key focus area for the company. Various initiatives taken/ being taken in this direction include installation of IPMS for real-time project monitoring, implementation of e-Office for faster decision making & file processing as well as integration of multiple ERP platforms for end-to-end monitoring of manufacturing, project execution and related processes to improve the   overall efficiency of the organisation. The performance management system has also been revamped for closer alignment of performance & rewards.