London Business School REF: CS-10-006
Suzlon Energy Ltd: Making Foray Abroad
Tulsi Tanti, the high profile Chairman of Suzlon Energy is reading out rave views made by some analysts and academicians about its global expansion. There are mixed opinion about his effort to make his form a vertically integrated one. In spite of its success, it was still not clear whether it should go ahead with more acquisitions and integrate the firm further. Certain decisions about its future expansions were also pending and were being fiercely debated in his boardroom. Tanti was to explain and do his best to make his team believe the value accrued to the organization by the past acquisitions. The degree of product customization and innovation was also something that was on his mind. As Suzlon was not into all kinds of turbines and demand for turbines of higher power was increasing. Suzlon needed to have a close look at it.
A Glance at Company’s Inception
Tulsi Tanti is from Gujarat, India where he started his first venture which was in textiles but he found the prospects stunted due to infrastructural bottlenecks. The biggest of them all was the cost and unavailability of power, which formed a high proportion of operating expenses of textile industry. In 1990, he invested in two wind turbine and realized their huge potential. In 1995, he formed Suzlon and gradually quit textiles.1 This is how he set out on a new path.
This case was prepared by Debasis Pradhan, XLRI School of Business and Human Resources, Jamshedpur, India as a basis for classroom discussion rather than to illustrate either effective or ineffective handling of a management situation. The case study was supported by the Aditya Birla India Centre at London Business School.
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The $10 billion Suzlon Energy is his wind power based company that has expanded its operations into various parts of the globe.2 W ith this successful venture, Tanti is amongst the ten richest Indians and one of the most successful entrepreneurs in Asian region. With a net worth of $5.9 billion, he is the chairman and managing director of Suzlon energy. Tanti owns 70% of the company with his three siblings.
Wind Energy Market
Globally, wind power generation has increased more than fivefold between 2000 and 2007. At the end of 2007, worldwide capacity of wind-powered generators was 94.1 giga watts. Though wind currently produces just over 1% of world-wide electricity use, there is an estimated 72 TW of wind energy on the Earth equivalent to 54,000 MToE (million tons of oil equivalents) per year that potentially can be commercially viable. 3 Steve Sawyer, Secretary General, GWEC (Global Wind Energy Council) says, “The wind energy market continues to achieve tremendous growth rates, and has now hit 20 GW of new installations per year. As a result, we have had to revise even our most ambitious estimates. The fastest areas of growth for the next five years will be North America and Asia, and more specifically, the U.S. and China”. This substantiates the aggressive business strategy of Suzlon to target more on China and USA.
The forecast of Global Wind Energy Council (GWEC) showed that the global wind market would grow by more than 155 percent, reaching 240 giga watts (GW) of total installed capacity by 2012. 4 In terms of economic value, wind energy sector has become an important player in the energy market, with the total value of new generating equipment installed in 2007 reaching €25 billion, or US $36 billion5 (Please see Exhibits1 and 2).
Forbes Business, January 21, 2008.