Suzlon Energy

SUZLON ENERGY LIMITED

The Suzlon Group is ranked as the world’s fifth largest wind turbine supplier, in terms of cumulative installed capacity, at the end of 2011. The company’s global spread extends across Asia, Australia,Europe, Africa and North and South America has over 20,500 MW of wind energy capacity installed in 32 countries, operations across 33 countries and a workforce of over 13,000.
The Group offers one of the most comprehensive product portfolios – ranging from sub-megawatt on-shore turbines at 600 Kilowatts (KW), to the world’s largest commercial 6.15 MW offshore turbine – with a vertically integrated, low-cost, manufacturing base. The Group – headquartered at Suzlon One Earth in Pune, India – comprises Suzlon Energy Limited and its subsidiaries, including REpower Systems SE.
Suzlon's story began in 1995 when founder Tulsi Tanti was managing a 20-employee textile company. Due to the local infrastructure's erratic availability of electricity and because of the rising costs of power, the highest business expenditure after the raw materials was electricity.
Suzlon was founded by Tulsi Tanti in 1995, when he was working in a family-owned textile company. In that year, India's shaky power grid and the rising cost of electricity offset any profits the company would make. After providing electricity for his own company, Tanti realized that other companies in India could also greatly benefit from being sold wind power technology and advised on its use. With the help of some of his friends of Rajkot, he moved into wind energy production as a way to secure the textile company's energy needs, and founded Suzlon Energy. Suzlon adopted a business model wherein clients would be responsible for 25% of the up-front capital investment and Suzlon would arrange the remaining 75% on loan. Initially banks were hesitant to fund loans for this model but by 2008 40-50 Indian banks were financing wind power projects for Suzlon clients.
In 2001, Tanti sold off the textile business, so he could focus on the development of his wind energy business. In 2009, Suzlon was actively run by Tulsi Tanti, in the role of Chairman.
In 2003, Suzlon got its first sale in USA, with an order from DanMar & Associates to supply 24 turbines in southwestern Minnesota. Also in 2003 Suzlon set up an office in Beijing.
Suzlon operates the 584 MW wind park in the Eastern Ghats, (Tamil Nadu). Also, the company operates what was at the time of construction Asia's largest wind park, a 201 MW park near the Koyna reservoir in Satara district of Maharashtra - The Vankusawade Wind Park.
Suzlon will install 45 units of its S88 – 2.1 megawatt wind turbine for AGL at the Hallett Wind Farm to be located approximately 220 kilometers north of Adelaide, in South Australia.
Suzlon will invest Rs 15000 crores in setting up a 2500 MW wind farm in Karnataka.

VISION
➢To be the technology leader in the wind industry
➢To be among the top three wind energy companies in the world
➢To be the most respected brand and preferred Company for all stakeholders
➢To be the best team and best place to work
➢To be the fastest growing and most profitable Company in the sector

BUSINESS STRATEGY
Suzlon seeks to enhance their position in India as a provider of integrated wind energy solutions and to expand their markets globally. They intend to accomplish it through;
1) Expanding their WTGs product line and improving existing models by leveraging the WTG design and develop capabilities that they have developed through their research and development subsidiaries, particularly in the MW and multi-MW class.
2) Integrating manufacturing facilities: They have developed and implemented a backward integration strategy that allows them to manufacture rotor blades in-house. They believe that increasing their in-house manufacturing capabilities will allow them to lower WTG manufacturing costs, give them greater control over the supply chain for key WTG components and enable quicker and more efficient assembly and delivery of WTG components to their customers.
3) Improving cost efficiency of generating power from wind energy by reducing the cost of generating electricity per kWh from their WTG. They plan to achieve this goal by focusing on designing and developing more advanced WTG, identifying sites which offer wind conditions that are optimal for WTG installations, reducing manufacturing and infrastructure costs, and by decreasing on-going operating costs for their customers.
4) Maintaining their strategic focus on the Indian market with believe that India is and will continue to be an important growth market for wind power. They will also continue to utilize the experience and expertise gained in their Indian operations to win and execute orders from international customers.
5) Expanding manufacturing capacity by constructing additional manufacturing facilities in India for key WTG components and they expect these facilities to be located close to the markets with growing demand for power generated by wind energy. This will reduce costs associated with transportation and delivery of these key but quite large WTG components

WIND ENERGY INDUSTRY
• Developers- one who leases land, prospects for wind and obtains statutory clearances
• Equipment Suppliers- one who manufactures and services WTGs and other capital goods.
• Customers- Basically investors.

Suzlon in India took the responsibility of both the developer and supplier providing comprehensive wind energy solutions to the prospective clients.

SUZLON INDIA
It contacts its potential clients through its local sales and marketing team which are made by its marketing team by doing balance sheet reviews of all the potential customers to ensure whether it has the financial capability to acquire and operate WTGs.
The sales team tries developing relationship with its prospective Clients through regular calls, by providing them technical feasibility studies, economic viability of the project and even by organizing visits to any existing wind farm.
Once all these are being done, buyer seller contract crops up. There are basically three types of contracts: turbine purchase contract, construction contract and operation, maintenance and service contract. Suzlon takes care of all these. And adding to it, it also helps in getting finances from financial institutions.
The buyer is supposed to make a down payment followed by instalments. The last payment, which is usually 20 % of the contract value is made upon testing and handover.

INTERNATIONAL MARKETS
It is very much similar to its domestic operation. The only difference is conducting road shows and participating in conferences of relevance etc. The company’s global marketing, sales, project and service activities were managed by the Danish subsidiary, Suzlon Energy A/S
• US: SWECO was set up in 2001. Sales and marketing priority was to establish ongoing business relationships with a core group of key customers with a view to secure exclusive WTG supply agreements
• Europe: Coordinated by Suzlon Wind Energy A/S in Denmark
• Asia-Pacific market: Australia and New Zealand were conducted bu Suzlon Energy Australia Ltd
• China: converted its Beijing sales office into a fully owned subsidiary

Environmental Advantages of Wind Energy
• Pollution Free
• Permanent
• Conserves fossil fuel
• Improves grid quality and efficiency
• Extremely low gestation
• Rural development

Few limitations of Wind Energy
1) Wind machines must be located where strong, dependable winds are available most of the time.
2) Electricity from wind machines must have a back-up supply from another source because wind does not flow every time strongly.
3) As wind power is intermitted, utility companies can use it for only part of their total energy needs.
4) Wind towers and turbine blades are subject to damage from high winds and lighting. Rotating parts, which are located high off the ground can be difficult and expensive to repair.
5) Electricity produced by wind power sometimes fluctuates in voltage and power factor, which can cause difficulties in linking its power to a utility system.

What makes wind energy business so skeptical?
The wind energy business is highly capital intensive, with almost 85 – 90% of the investment being spend on capital expenditures. The cost of goods sold also comprises of 60-70 % of its sales leaving apart other selling expenses. Hence for a customer, the decision to purchase is highly influenced by financial factors (interest rates on loan, loan repayment period, tax incentives and revenue for the next 10 years at least).
Sometimes even some natural factors goes against this like wind speed, which is highly unpredictable especially onshore.
The situations above create low profit margin as customers won't pay premium prices in view of unpredictability.
Furthermore electricity generated at the turbines have to immediately send to the grid as it cannot stored.
All this implies Wind energy is not controllable by schedule and not available on demand.
Leaving all these there are procedural and judiciary problems too entangled with it. All these things bring negative impact on the ROI.

Problems faced by Suzlon
• A complex buying process- From Suzlon, vendor’s perspective wind energy equipment sourcing is a complex buying process. Clients are hard to come by due to high capital investments and regulatory problems. If at all they are interested they have knowledge and implementation related problems. So just mere equipment sourcing is not sufficient in this case, they have to provide an entire solution right from ordering to implementation which makes it complex.
• Decentralized purchasing decision- Suzlon has units in different locations across the world. Procurement at individual unit is done in a decentralised fashion which makes the inventory, transportation and procurement cost very high.
• Large purchase orders- Clients as well as Suzlon itself make huge purchases because the dynamics of the business demands so. Multinational Clients which have units in different countries prefer to have one point of contact with the company. Even Suzlon requires one centralised purchasing department to handle all its supplies around the world.
• Need for special services- Individual clients have individual demand where customisation is required.
• Multiple businesses and service units- Suzlon has operation spread across America, Europe, Asia, and many more, which is creating problem in their delivery model. Global clients are not getting uniform delivery from its strategic business units spread across the world.

How can the above problems be resolved?
Multinational customers are looking for strategic partners who understand their specific business needs and are able to deploy it on a global basis. For companies having global clients purchasing globally, creating a platform where they can get uniform delivery is a must. This makes delivery, pricing all such things transparent and also brings consistency throughout its delivery. If to be given in precise they can follow the following ways to tackle the problems:
• By understanding specific international business needs and deploy solution on a global basis.
• By partnering with clients.
• By establishing only one point of contact.
• By introducing uniform purchasing and pricing pattern.
• By implementing consistent worldwide services.

What is GAM?
Global account management is defined as an organizational form and process in multinational companies by which worldwide activities serving a given multinational are coordinated by one person or team centrally within the supplying company or vendor. The concept is simple, from a customer’s perspective because it provides for them a single point of contact with the vendor’s organization. However from vendors’ perspective its implementation is frequently problematic.

Problems in GAM implementation
1) Loss of internal support and conflict with geographic managers.
2) Restructuring the organization to accommodate global clients means incurring additional fixed cost.
3) Implementing control across all the levels of management would be difficult.
We would suggest going in for a pilot project because of the problems stated above. The normal problems we can associate GAM with, arises when dealing with coordinating global efforts. The language, communication, knowledge, awareness, work culture and business differences with SBUs and subsidiaries can add another layer of complexity to the Global account management team.

Drivers for GAM in Suzlon
• Rapid evolving technology escalated the product development cost which in turn pressurized companies to achieve economies of scale by globalizing production.
• Emergence of global customers purchasing globally
• To exploit arbitrage opportunities
• Arrival of global competitors keen to exploit industry’s potential.
• To leverage some marketing strengths like the brand and Sales Technique to yield better returns.

How should GAM be implemented in Suzlon?
It would be more effective to bring in GAM in an evolutionary way because the changes can happen more smoothly and comfortably, and in a more realistic time frame rather than trying to establish all aspects of global accounts management instantly setting themselves up for problems.
Initially the focus should be on managing the on-going complexity of the customers ensuring on going sales and maintaining service standards.

Handling the problem more effectively with GAM
Suzlon should concentrate on the decision making part only and have all employees responsible for the account in every region of the world report directly to them. They should assume the role of a coordinator of resources, developer of plans, and communicator of strategies and not sales person reporting to them. They should create a sense of unity and alignment that tops priority on the corporate side. Each account requires a global strategy and implementation plan with emphasis on local tactics.
At a local level, they should be able to implement the programs that meet the client's needs in that country.
What is important is that the company provides global messaging, information, and access to support local engagement efforts, while allowing flexibility for regional variations.