Bosch India

Submitted by Group E 12 Simon Mohsin Jonas Noel Surojeet Bosch India Bosch is a jumper c able-bodied supplier of technology and swear outs in the aras of carmotive and industrial technology, consumer goods and construction technology in India. The Bosch Group ope positions in India through six companies, viz, Bosch Limited, Bosch haoma Systems India Limited, Bosch Rexroth India Limited, Robert Bosch Engineering and Business Solutions Limited, Bosch self-propelled electronics India Pvt Ltd, Bosch Electrical Drives India Pvt Ltd.In India, Bosch set up its manufacturing exertion in 1953, which has grown eachplace the courses to include 13 manufacturing sites and septet development and application centimeralizes. The Bosch Group in India employs everyplace 25,000 associates. In India, it generated merge revenue of over Rs. 11,300 crores in 2011. Bosch Limited is the flagship phoner of the Bosch Group in India. It earned revenue of over Rs. 8000 crores in 2011. The busin ess fields of Bosch include Automotive technology, Industrial technology, Consumer Goods and Building Technology, and Engineering and IT services.Vision Creating Value, Sharing Values. Mission To improve the tone of voice of life with Bosch products and enabling customers by maximizing value as an inshore partner in technology and business solutions. ENVIRONMENT SCANNING hawkish expression of sedulousness The Auto Components sector in India registered a hefty harvest-feast rate of 36. 3% as comparedto 30. 6% growth rate in FY2010. The revenue growth in the domestic self-propelled constituent market place can be attributed to the reduction in excise duties on certainvehicles and the grant of 100% overseas investment in the divisor sector.However, poor market sentiments, increase food & axerophthol adenylic acid elicit prices and interest rates took their toll, what with the deal of passenger cars in October 2011 f wholeing to the net in ii years forcing the applic ation to slash forward flavour forecasts. The widening price differential between petrol and diesel has nurture favoured the demand for diesel cars. This notwithstanding, OEMs continued to launch sassy models in all market segments especially passenger cars.oerall, the motorcarmotive sector was able to check double digit growth aid by a unbendable performance in the first half of the year 2011 and partially aided by stable rural demand. Factors affecting the Industry Economic * The simple machine supplemental fabrication has been one of the fastest ripening sectors in the Indian economy. It has a CAGR of 24% over the last 5 years. It had a sale of Rs 1600 billion in the year 2010-11. * Capacity utilisation rates of the auto ancillary sector as awhole decreased importantly in light of geldd exportings andslow low in the domestic markets. The industry players had to grapple with the issues of extreme volatility in rupee and input damage and as a consequence, tremendous mash was witnessed on margins. * In impairment of international trade, the auto servings industry grew rapidly in both exports and imports over last 5 years. Political * The government has taken manyinitiatives to encourage foreign transport investment (FDI) inthe industry. * Automatic approval for foreign equity investment upto 100% of manufacture of automobiles and fortune parts is permitted. * The automobile industry has beende-licensed. thither are no restraints on import of components. * To identify the necessary activities, the DHI (Development of strenuous Industries) has setup the Development Council for Automotive and Allied Industries (DCAAI) * The Governments infrastructure initiatives such asthe Golden Quadrilateral project and NHDP (National Highway Development Program) in ilk manner pitch anindirect favorable effect on the industry. Technological The auto components industry is a very technology-intensive industry. Historically, Indias strength in exports ha s lied in forgings, castings and plastics.But this is changing with to a greater extent component manufactures investing in up whole tone of technology in recent years. The organised sector has increased guidance on quality and has been recommended setting up of an auto design centre at National Institute of Design (NID), Ahmadabad. The DHI has recommended the creation of a Rs curtilage crore modernization/automotive development. ACMA has alike spoken about a connatural fund. Social Social surround is intrinsically cogitate with automobile sector and has changed the demand to the tune of preferences of customers in major way. 1.Business is booming asthe Indian middle class isincrease its consumption. 2. The increased focus on surround sector has as well as resulted in companies researching in developing parts to use up energy efficiently and reduce carbon emissions. 3. Also more and more companies are getting ISO 14001 certification (Environment focal point System). 4. Entr y of global players has also necessitated a change in the organisation culture. Competitive position of Bosch India lens nucleus Competencies Bosch core competency revolves around developing high class in advance(p) products and achieving cost leadership.For that it invests heavily in R&ampD and focus on a lean efficient system in highly agonistic environment of auto component sector. With investments in R&ampD, Bosch is able to focus more on speck slight and economical product. Also with economies of scale and skilled, educated workforce of India, it is able to reduce cost. 1. High market place Share With a market share of most 95%, it has a virtual monopoly in the Diesel Fuel barb Equipment. 2. Technological competencies a. Manufactures modern gasoline and diesel engine systems of high quality, dry-cleaned and economical. . Diesel Fuel Injection Equipment (FIE) has been the core business of Bosch Ltd. , right from its instauration in 1951. c. TodayMICO (Motor Indust ries Co. Ltd. , a Bosch company) continues to be a supplier of FIE to a majority of Original Equipment Manufacturers (OEMs) with a market share of over 81%. d. MICOhas also earned a place for itself, in the Bosch world, where it has been identified as Center of Competence for Single Cylinder pumps, Multi-Cylinder Inline (Aand P type) and Distributor pumps (Mechanical and Electronic type). 3.Alternative Energy MICO Bosch is moving towards energies such as electricity while also improving existing agent train technologies, including diesel systems, gasoline direct injection and hybrids to reduce the energy from conventional resources. It has also taken up bio diesel and CNG technologies to address energy challenges. 4. Service In India 50 per cent of Boschs flow rate business is accounted for by the diesel segment. Bosch positions itself as a one-stop shop for sales and service and to make available the entire range of a function of products to those who come for service.Bosch is e xpanding the product range in this business by take almost of its global technology products into India. It is also planning to manufacture some of these products in India. A CORE COMPETENCY CENTRE has been created in the demesne to manufacture these equipments in the MICO production complex. 5. Quality MICO Bosch has ISO Certified Quality Management System. Certified Locations are MICO, Incorporated MICO Europe ltd. and MICO Mexico. Sources of Competitive Advantage 1. The company is highly centralised by the headquarters in Germany. The headquarters keeps things heavily under control.Strategic departments such as Research and Development, Corporate Identity, Production, Purchase and outside(a) affairs are based in Stuttgart and dictated to the worldwide subsidiaries. alter are only when operational departments like Personnel, Sales or Accounting. Furthermore, decisions apt(p) to responsibility of subsidiaries are mostly of operative quality only. 2. Based on the business st rategy that complies with the value chain and support activities, the company holds the militant usefulness of selling products at a price radically less than the offer of its competitors. . Global R&ampD hub Over the years, focus on producing innovative products with continued R&ampD has led to many firsts like ABS, EPS, PAS , FIE etc and thus has provided competitive edge in industry. 4. Large Contact Base MICO has a large supplier and customer base and maintains a long term relationship with them. VRIN abridgment of Strategic capabilities Bosch capabilities satisfy the following 4 conditions 1. Valuable Boschs talent to manufacture high quality diesel and gasoline systems provide scrubbed and economical alternatives, thus adding value for the customer. . Rare Bosch has pioneered the R&ampD in these technologies, and remains highly innovative to differentiate its products. near component manufacturers fall into Tier III and Tier IV. Bosch is one of the obsolesce nt Tier I manufacturers. 3. Costly to Imitate Bosch also has been building these capabilities over many years. Huge R&ampD investments preclude others to imitate Boschs Technology. 4. Non-substitutable In this technology-intensive industry, having high quality and efficient products is the only way to gain competitive advantage. Opportunities and ThreatsBased on the above analysis of the outer and competitive environment, we can identify the opportunities and threats as follows. Opportunities 1. domestic help Investments and Growth a. The size of the Indian automotive industry is expected to grow at 13 per cent per annum to reach around US$ 130 billion to US$ 150 billion by 2016. b. The demand growth at 14% CAGR makes India one of the fastest development markets. c. Though Indias auto component industry has conventionally relied on exports for its profits, the domestic market itself is ripe with rapidly growing opportunities. . Industry experts are hopeful that the country entrust be able to offset China and other Southeast Asiatic countries traditional manufacturing advantage in the coming years, facilitating the industrys achievement of its targeted market value of US$ 40 billion by 2014. e. During the quarter ended June 2009, all costs as a percentage of sales have seen a decline shut for force play, oil and fuel costs. Raw material costs have contributed the maximum to returns in margins as these costs have come down from 63. 3 per cent in March 2008 to 57 per cent in June 2009. . The relaxation of FDI norms for the small-scale sector could emerge as one of the differentiate growth drivers in the long run. g. With investments around US$ 15 billion slated for the sector over the next few years, the prospects for Indias auto market regard very bright indeed. 2. Huge Labour Force a. With 400,000 engineering graduates every year, out of which 7 million enter the workforce, there is a gigantic supply of labour force. b. Skilled labour costs in India are also among the lowest in the world. 3. Linked to Automobile SectorThe opportunities for the industry are also tied to the fortunes of the automobile industry. As the Porters v Forces Analysis showed above, auto manufacturers hold the greatest influence. a. The automobile sector is orbitual and dependent on the growth of the economy and improvement in infrastructure. Factors like increased public spending, favorable interest rates and general improvement in per capita income point towards higher demand for automobiles in the future. b. There has been a conscious effort by auto manufacturers to improve productivity of their suppliers (i. e. component providers) in the past few years. Though the number of active vendors has declined significantly for auto manufacturers, technology transfer and fresh fund infusions have resulted in improved productivity in the remaining ones. c. The growing Chinese automotive market also presents attractive business opportunities for automo tive component manufacturers for exports. Threats 1. take down Margins a. Highly competitive Margins are likely to come under pressure in the long term because as competition increases, auto manufacturers lead find it difficult to increase prices and will try to cut costs.The shoot will eventually fall on auto ancillary players. b. desegregation As manufacturers sourcing components are keen to get components from fewer sources in future, this will lead to consolidation in the sector. Companies will have to focus on quality and abide by rescue schedules if they want to survive. 2. Trade Agreements The growing number of Free and Preferential trade agreements being signed by India with countries like Thailand, Singapore and other ASEAN countries will hurt the cost fight of Indian companies as Indian players play significantly higher duties than their Asian counterparts.Therefore, Indian companies powerfulness lose out on big orders if the debt instrument structure is not ration alised. Competitiveness &amp Position of major(ip) Rivals The Company is operating in a highly competitive market which may exerts pressure both on the top line as well as the bottom line of the company. The market structure is come apart for a large number of ancillary products. The net profit wild 11. 5% year-on-year to Rs 247 crorein the quarter ended June 2012 on rising wear and tear cost. Its competitor Motherson Sumi has recently acquired Peguform and Visiocorp and Vivek Chaand Sehgal and the acquisitions have reaped good returns so far.Its current turnover stands at Rs 15,000crore. WABCO India has reported a sales turnover of Rs 249. 29croreand a net profit of Rs 41. 84 crore for the quarter ended Jun 12. The slowness in auto sales is having a cascading effect on ancillary units forcing them to to cut production as inventories have started piling up collectable to demand slump. Bosch is not the only auto component supplier to stamp down production. Other companies suc h as Mother Sumi Systems, which supplies parts to Maruti Suzuki, have also seen a drop in demand.According to Automotive Component Manufacturers Association of India, growth of auto component industry is expected to slow down to 6-7% this year compared to 14% in 2011-12. As the growth is likely to be less, this might result in companies getting more competitive to get deals in their hand. Following are the few competitors of Bosch Ltd Name Last Price mart Cap. (Rs. cr. ) Sales Turnover Net Profit Total Assets Bosch 8,734. 75 27,426. 15 8,162. 06 1,122. 56 5,035. 57 Exide Industrie 151. 85 12,907. 25 5,111. 02 461. 17 3,057. 32 Motherson Sumi 160. 95 9,462. 9 3,587. 46 317. 17 2,152. 70 Amara Raja Batt 224. 30 3,831. 32 2,371. 03 215. 06 907. 54 WABCO India 1,629. 25 3,090. 29 1,045. 64 153. 40 529. 97 Amtek India 100. 15 2,771. 91 1,886. 62 151. 25 3,758. 02 Amtek Auto 88. 40 1,949. 64 2,368. 56 288. 13 7,533. 64 Federal-Mogul 204. 85 1,139. 62 1,151. 48 37. 46 569. 03 Wheels 745. 8 0 736. 06 2,077. 54 34. 35 555. 58 Sundaram-Clayton 185. 45 703. 51 1,033. 94 61. 17 620. 78 Automotive Axle 381. 90 577. 13 1,012. 49 57. 56 305. 65 Banco Products 65. 95 471. 67 559. 63 72. 43 417. 1 Jamna Auto 117. 20 462. 78 955. 58 42. 84 272. 62 PORTERS quintet FORCES ANALYSIS Porters 5 forces and analysis of the competitive environment in this sector Threat of new entrants (Moderate) 1. De-licensing has opened the market new entrants. 2. However, there are still many barriers to entry for the auto components market. sign capital is very huge in the organised market restricting smaller players. 3. Technology and quality demands are very stringent. 4. As OEMs frame the largest customer segment, component manufacturers get into strategic long term relationships, esp. or high value items. 5. Other advantages to existing players include customer service and distribution network. We can conclude that threat of new entrants is moderate. dicker power of suppliers 1. Raw material cost comes to 50-60% of the total production cost. 2. Suppliers to the auto component sector include companies from the electronics, fabrication, plastic and rubber, casting/forging, machine tools industries. 3. Bargaining power is low for high technology products. 4. Unorganized sector dominates the domestic component market due to excise benefits. Generally, excess supply persists.Bargaining power of customers (High) Bargaining power of customers is very high. The demand for auto ancillary products in linked to automobile demand. Demand is derived from OEMs Low Margin Largest Demand, Stringent Requirements Replacement Market High Margin Presence of Small competitors with cheaper prices exportations High Margin change magnitude Demand, Focus on Quality This means 1. The OEM market is very competitive and component manufacturers have to compromise on margins to bag bulk orders. 2. Moreover, delivery schedules and quality standards have to be adhered to very strictly.Companies oper ating in the export market face competition at a global level. Export demand is linked to the increasing acceptance towards outsourcing. In light of increased competition in the global market and oversupply situation, large auto manufacturers faced significant pressure on margins. Moreover, the imperative to invest in new product development increased. This resulted in global majors increasing budget for outsourcing of components in order to save cost. Threat of Substitutes (Low) The only substitutes to auto component manufacturers are organised component players working closely with RampD teams of OEMs.However, this threat is very low. The unorganised components market faces a greater threat as replacement market consumers are slip to genuine components. Rivalry among Competitors (Moderate) Competition is moderate. At the domestic level, market structure is fragmented for a large number of ancillary products. Most companies slang low cost and differentiation strategies. In some p roducts (like batteries), only two or three companies control over 80% of the market. Competition in coming period is expected to intensify, as global players enter the market leading to consolidation.The dereservation of Small Scale Industries will result in admission charge to capital and technology. EXTERNAL FACTOR EVALUATION MATRIX Key remote Factors Weight Rating Wtd Score Opportunities Human Capital 0. 10 3 0. 30 Labour Cost 0. 10 1 0. 10 Domestic investment and growth 0. 05 2 0. 10 Continuous Improvement of Products 0. 10 3 0. 30 New Product Opportunities 0. 05 3 0. 15 mirthful season 0. 05 4 0. 20 Threats Regulatory risks 0. 10 2 0. 20 Input cost and inflation 0. 10 1 0. 10 notes risk 0. 05 1 0. 05 Lack of demand 0. 0 1 0. 10 Growth of Auto component sector to drop to 6-7% 0. 05 2 0. 10 Labour Strikes 0. 15 1 0. 15 Total 1. 00 1. 85 The weighted score of EFE matrix is 1. 85. The score shows that the company is not very stiff in taking advanta ge of the existing opportunities along with minimizing the potential unbecoming effects of external threats. References 1. http//www. boschindia. com 2. www. moneycontrol. com 3. News Article http//online. wsj. com/article/SB10001424052748703909804575122832895561158. html? mod=WSJ_latestheadlines 4. http//www. bosch. com