Bosch India

Submitted by Group E 12 Simon Mohsin Jonas Noel Surojeet Bosch India Bosch is a leading supplier of technology and services in the areas of railway carmobilemotive and industrial technology, consumer respectables and building technology in India. The Bosch Group operates in India through six companies, viz, Bosch limit, Bosch Chassis Systems India Limited, Bosch Rexroth India Limited, Robert Bosch Engineering and Business Solutions Limited, Bosch Automotive electronics India Pvt Ltd, Bosch galvanic Drives India Pvt Ltd.In India, Bosch set up its manufacturing operation in 1953, which has grown over the age to complicate 13 manufacturing sites and seven development and application pennyres. The Bosch Group in India employs over 25,000 associates. In India, it generated consolidated revenue of over Rs. 11,300 crores in 2011. Bosch Limited is the flagship fraternity of the Bosch Group in India. It earned revenue of over Rs. 8000 crores in 2011. The occupancy fields of Bosch inc lude Automotive technology, Industrial technology, Consumer Goods and Building Technology, and Engineering and IT services.Vision Creating Value, share- stunned Values. Mission To improve the quality of life with Bosch products and enabling customers by maximize value as an offshore partner in technology and melody solutions. ENVIRONMENT SCANNING warring structure of industry The Auto members area in India registered a strong growth rate of 36. 3% as comparedto 30. 6% growth rate in FY2010. The revenue growth in the domesticated automotive percentage mart can be attributed to the step-down in excise duties on certainvehicles and the grant of 100% inappropriate investment in the component empyrean.However, poor securities industry sentiments, increased food & axerophthol fuel prices and stakes rates took their toll, what with the sale of passenger cars in October 2011 falling to the lowest in two categorys forcing the industry to pull down forward looking forecasts. T he widening price differential between natural gas and diesel has further favoured the call for for diesel cars. This nonwithstanding, OEMs continued to launch recent models in all food marketplaceplace segments especially passenger cars.Overall, the automotive empyrean was able to sustain double digit growth aided by a solid performance in the first half of the year 2011 and partially aided by stable rural hold. Factors affecting the intentness Economic * The auto adjunct industry has been one of the fastest outgrowth 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 usance rates of the auto supplemental sector as a self-coloured decreased significantly in light of less(prenominal)end exports and obtusedown in the domestic markets. The industry fulfillers had to grapple with the issues of extreme volatility in rupee and input cost and as a consequence, tremendous pressure was w itnessed on margins. * In terms of international deal, the auto components industry grew rapidly in both exports and imports over last 5 years. Political * The government has taken manyinitiatives to promote foreign figure investment (FDI) inthe industry. * impulsive approval for foreign equity investment upto 100% of manufacture of gondolas and components is permitted. * The automobile industry has beende-licensed. There are no restraints on import of components. * To disclose the necessary activities, the DHI ( maturement of Heavy Industries) has setup the Development Council for Automotive and Allied Industries (DCAAI) * The Governments pedestal initiatives such asthe Golden Quadrilateral project and NHDP (National laid-backway Development Program) also waste anindirect favorable loading on the industry. proficient The auto components industry is a very technology-intensive industry. Historically, Indias strength in exports has lied in forgings, castings and plastics. But this is changing with more component manufactures investing in up gradation of technology in recent years. The coordinate sector has increased stress on quality and has been recomm finish setting up of an auto design centre at National Institute of Design (NID), Ahmadabad. The DHI has recommended the concept of a Rs 1000 crore modernization/automotive development. ACMA has also spoken intimately a similar fund. Social Social environment is intrinsically link with automobile sector and has changed the demand to the tune of preferences of customers in major way. 1.Business is go asthe Indian middle class isincreasing its consumption. 2. The increased c tangle withing on environment sector has also government issueed in companies researching in ontogenesis move to use energy efficiently and reduce carbon emissions. 3. likewise more and more companies are get goingting ISO 14001 certification (Environment instruction System). 4. immersion of spherical players has also necessitated a change in the organisation culture. Competitive position of Bosch India Core Competencies Bosch core competency revolves virtually developing graduate(prenominal) class innovative products and achieving cost leadership.For that it invests heavily in R&type AD and focus on a lean efficient formation in proudly competitive environment of auto component sector. With investments in R&D, Bosch is able to focus more on unspotted and economical product. Also with economies of scale and skil conduct, educated workforce of India, it is able to reduce cost. 1. High Market Share With a market share of close to 95%, it has a virtual monopoly in the Diesel Fuel shaft Equipment. 2. Technological competencies a. Manufactures modern gasoline and diesel engine systems of steep quality, unstained and economical. . Diesel Fuel Injection Equipment (FIE) has been the core business of Bosch Ltd. , right from its foundation in 1951. c. TodayMICO (Motor Industries 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 power 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 current business is accounted for by the diesel segment. Bosch positions itself as a one-s overstep shop for sales and service and to make available the entire thread of products to those who come for service.Bosch is expanding the product range in this business by legal transfer whatsoever of its world(prenominal) 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 rude to manufacture these equipments in the MICO issue 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 exceedingly centralised by the head quarters in Germany. The headquarters keeps things unwaveringly under control.Strategic departments such as Research and Development, Corporate Identity, Production, Purchase and outside affairs are rootd in Stuttgart and dictated to the worldwide subsidiaries. decentralise are only operational departments like Personnel, Sales or Accounting. Furthermore, decisions disposed(p) to responsibility of subsidiaries are mostly of operative quality only. 2. Based on the busi ness strategy that complies with the value chain and support activities, the company holds the competitive advantage of selling products at a price radically less than the offer of its competitors. . Global R&D hub Over the years, focus on producing innovative products with continued R&D has led to many firsts like ABS, EPS, PAS , FIE etc and and then has provided competitive edge in industry. 4. too large Contact Base MICO has a large supplier and customer base and maintains a pertinacious term relationship with them. VRIN Analysis of Strategic capabilities Bosch capabilities fill the following 4 conditions 1. Valuable Boschs capability to manufacture high quality diesel and gasoline systems provide cleaner and economical alternatives, thus adding value for the customer. . Rare Bosch has pioneered the R&D in these technologies, and stiff highly innovative to differentiate its products. Most component manufacturers fall into degree III and Tier IV. Bosch is one of the rare Tier I manufacturers. 3. dearly-won to Imitate Bosch also has been building these capabilities over many years. Huge R&D investments prohibit 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 bratsBased on the above psychoanalysis of the external and competitive environment, we can identify the opportunities and threats as follows. Opportunities 1. Domestic Investments and Growth a. The size of the Indian automotive industry is evaluate 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 growing 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 pr ovince impart be able to offset China and other selenium Asian 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 be as a percentage of sales have seen a decline except for power, oil and fuel costs. Raw sensible costs have contributed the maximum to improvement in margins as these costs have come down from 63. 3 per cent in establish 2008 to 57 per cent in June 2009. . The relaxation of FDI norms for the small-scale sector could go away as one of the key growth drivers in the long run. g. With investments around US$ 15 billion slated for the sector over the next some years, the prospects for Indias auto market look very bright indeed. 2. Huge exertion Force a. With 400,000 engineering graduates every year, out of which 7 million enter the workforce, there is a huge furnish of jade force. b. Skilled labour costs in India are also among the lowest in the world. 3. link to Automobile SectorThe opportunities for the industry are also tied to the fortunes of the automobile industry. As the Porters Five Forces Analysis showed above, auto manufacturers hold the great influence. a. The automobile sector is cyclical 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 clean fund infusions have resulted in improved productivity in the be ones. c. The growing Chinese automotive market also presents attractive business opportunities for automotive component manufacturers for exports. Threats 1. Lower Margins a. Highly competitive Margins are seeming to come under pressure in the long term because as competition increases, auto manufacturers pull up stakes find it difficult to increase prices and allow try to cut costs.The burden will eventually fall on auto ancillary players. b. Consolidation 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 lurch 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 competitiveness of Indian companies as Indian players play significantly higher duties than their Asian counterparts.Therefore, Indian companies might lose out on big orders if the duty structure is not rationalised. Competitiv eness & Position of Major Rivals The Company is operate 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 fragmented for a large number of ancillary products. The clear up profit fell 11. 5% year-on-year to Rs 247 crorein the quarter ended June 2012 on rising depreciation 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 slowdown in auto sales is having a cascading effect on ancillary units forcing them to to cut production as inventories have started great deal up due to demand slump. Bosch is not the only auto component supplier to curtail production. Other companies such as Mother Sumi Systems, which supplies parts to Maruti Suzuki, have also seen a upchuck 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 liable(predicate) 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 become Price Market Cap. (Rs. cr. ) Sales Turnover Net Profit wide-cut 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. 80 736. 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 ostiariusS FIVE FORCES ANALYSIS Porters 5 forces and analysis of the competitive environment in this sector Threat of rude(a) entrants (Moderate) 1. De-licensing has exposed the market new entrants. 2. However, there are still many barriers to intro for the auto components market. Initial capital is very huge in the organised market restricting smaller players. 3. Technology and quality demands are very stringent. 4. As OEMs constitute 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. Bargaining power of suppliers 1. Ra w 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, mould 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, loaded Requirements Replacement Market High Margin Presence of Small competitors with cheaper prices Exports High Margin Increasing Demand, Focus on Quality This means 1. The OEM market is very competitive and component manufacturers have to compromise on margins to bulge out bulk orders. 2. Moreover, delivery schedules and quality standards have to be adhered to very strictly.Companies o perating 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 deluge situation, large auto manufacturers faced significant pressure on margins. Moreover, the despotic 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 operative closely with RampD teams of OEMs.However, this threat is very low. The nonunionised components market faces a greater threat as replacement market consumers are shifting 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 adopt low cost and differentiation strategies. In some products (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 access to capital and technology. EXTERNAL FACTOR EVALUATION hyaloplasm Key External Factors Weight Rating Wtd Score Opportunities Human hood 0. 10 3 0. 30 Labour Cost 0. 10 1 0. 10 Domestic investment and growth 0. 05 2 0. 10 consecutive Improvement of Products 0. 10 3 0. 30 New Product Opportunities 0. 05 3 0. 15 Festive season 0. 05 4 0. 20 Threats Regulatory risks 0. 10 2 0. 20 Input cost and inflation 0. 10 1 0. 10 Currency 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 union 1. 00 1. 85 The weighted score of EFE matrix is 1. 85. The score shows that the company is not very effective in taking adv antage of the existing opportunities on with minimizing the potential adverse effects of external threats. References 1. http//www. boschindia. com 2. www. moneycontrol. com 3. News Article http//online. wsj. com/ expression/SB10001424052748703909804575122832895561158. html? mod=WSJ_latestheadlines 4. http//www. bosch. com