CASE: 3 THE
INTERNATIONALIZATION OF KALYANI GROUP
The Kalyani
Group is a large family-business group of India USA ,
Hayes Lemmerz, USA and FAW
Corporation, China
The flagship company of the Group is Bharat Forge Limited that is
claimed to be the second largest forging company in the world and the largest
nationally, with about 80 per cent share in axle and engine components. The
other major companies of the Group are Kalyani Steels, Kalyani Carpenter
Special Steels, Kalyani Lemmerz, Automotive Axles, Kalyani Thermal Systems, BF
Utilities, Hikal Limited, Epicenter and Synise Technologies
The emphasis on internationalisation is reflected in the vision
statement of the Group where two of the five points relate to the Group trying
to be a world-class organisation and achieving growth aggressively by accessing
global markets. The Group is led by Mr. B.N. Kalyani, who is considered to be
the major force behind the Group’s aggressive internationalisation drive. Mr.
Kalyani joined the Group in 1972 when it was a small-scale diesel engine
component business.
The corporate strategy of the Group is a combination of
concentration of its core competence in its business with efforts at building,
nurturing and sustaining mutually beneficial partnerships with alliance
partners and customers. The value of these partnerships essentially lies in
collaborative product development with the partners who are the original
equipment manufacturers. The foreign partners are not intended to provide
expansion in capacity, but to enable the Kalyani Group to extend its global
marketing reach.
In achieving its successful status, the Kalyani Group has followed
the path of integration, extending from the upstream steel making to downstream
machining for auto components such as crank-shafts, front axle beams, steering
knuckles, cam-shafts, connecting rods and rocker arms. In all these products,
the Group has tried to move up the value chain instead of providing just the raw
forgings. In the 1990s, it undertook a restructuring exercise to trim its
unrelated businesses such as television and video products and concentrate on
its core business of auto components.
Four factors are supposed to have influenced the growth of the Group
over the years. These are mentioned below:
·
Focussing on core businesses to
maximise growth potential
·
Attaining aggressive cost
savings
·
Expanding geographically to
build global capacity and establishing leading positions
·
Achieving external growth through
acquisitions
The Group companies are claimed to be positioned at either number
one or two in their respective businesses. For instance, the Group claims to be
number one in forging and machined components, axle aggregates, wheels and
alloy steel. The technology used by the Group in its mainline business of auto
components and other businesses, is claimed to be state-of-the-art. The Group
invests in forging technology to enhance efficiency, production quality and
design capabilities. The Group’s emphasis on technology can be gauged from the
fact that in the 1990s, it took the risky decision of investing Rs. 100 crore
in the then latest forging technology, when the total Group turnover was barely
Rs. 230 crore. Information technology is applied for product development,
reducing production and product development time, supply-chain management and
marketing of products. The Group lays high emphasis on research and development
for providing engineering support, advanced metallurgical analysis and latest
testing equipment in tandem with its high-class manufacturing facilities.
Being a top-driven group, the pattern of strategic decision-making
within seems to be entrepreneurial. There was an attempt to formulate a
five-year strategic plan in 1997, with the participation of the company
executives. But no much is mentioned in the business press about that
collaborative strategic decision-making after that.
Recent strategic moves include Kalyani Steels, a Group company,
entering into a joint venture agreement in may 2007, with Gerdau S.A. Brazil for
installation of rolling mills. An attempt to move out of the mainstream forging
business was made when the Group strengthened its position in the prospective
business of wind energy through 100 per cent acquisition of RSBconsult GmbH
(RSB) of Germany
Questions:
1.
What is the motive for
internationalisation by the Kalyani Group? Discuss.
Mr B N
Kalyani , Chairman of the USD 2.5 Billion,
Kalyani Group is the principal driving force behind the growth and success of
the Kalyani Group of Companies.
An able entrepreneur and technocrat, Mr
Kalyani has enriched the group with his vision of sound business governance and
value driven management practices. He is the driving force behind the group's
spirit and commitment to deliver products and services of uncompromising
quality and integrity consistent with the Kalyani brand and image.
With a business experience of over three
decades, Group Chairman, Mr B N Kalyani believes that the ability to innovate
and change is critical to the ongoing success of any business. Anticipating
what the future may bring and predicting the needs of customers in a fast
changing marketplace can be extremely difficult; yet that really is the basis
of any strategy.
Mr. Kalyani has set the group on its
growth path and is credited with the extraordinary vision for its entry into
the fast emerging infrastructure development arena in India.
The group has tied up with Alstom, France
to manufacture turbines and generators required for various super critical
power plants. The Bangalore-Mysore Infrastructure Corridor, is one of the
largest and most ambitious self-contained infrastructure projects of its kind
that is being set up in the country which will contribute in changing the
economic face of Karnataka. In addition, the group is setting up the largest
multi-product Special Economic Zone in Pune District of Maharashtra.
In pursuance of his vision to contribute
to a clean and emission free environment, the group has set up a wind energy
company - KENERSYS to manufacture various energy efficient wind turbines for
domestic and international markets. The group also has its own wind turbines in
Maharashtra which generate "green energy" for the group's
manufacturing operations.
Mr Kalyani takes
pride in being at the forefront of a globalizing India and to contribute in
making "Made in India" a global high tech brand in the manufacturing
industry.
2.
Which type of international
strategy is Kalyani Group adopting? Explain.
At the Kalyani Group, the key to
successful marketing is a thorough understanding of the environment in which
your business operates, your position in the market place, products and service
opportunities, competition, and most of all changing customer need.
With a business experience of 27
years, Group Chairman, Mr B N Kalyani believes that the ability to innovate and
change is critical to the ongoing success of any business. Anticipating what
the future may bring and predicting the needs of customers in a fast changing
marketplace can be extremely difficult; yet that really is the basis of any
strategy.
Positioning
“Kalyani Group Companies are positioned No.1 or No.2 in all main businesses in the Indian Market and are also exporting to international OEM’s”
·
1 in Forging & Machined
components
·
1 in Axle Aggregates in India
·
1 in Wheels in India
·
1 in Alloy Steel
Since 1997, the company has been
relentlessly following a global strategy though it had virtually no prescence
in globel markets till then.By 2005, total revenue of the company. Bharat Forge
has also been successful in making significant headway in supplying engine and
suspension components to prestigious European OEM’s. Bharat Forge now has 50
international customers. These include major customers such as Daimler
Chrysler, Caterpillar- Perkins, Renault Vehicle Industries, Volvo, Honda,
Cummins, Dana, Arvin Meritor and Toyota. No wonder Bharat Forge proudly boasts
of being India’s largest exporter of auto components. It greets visitors on its
website with: “Bharat Forge Ltd., the flagship company of the US $1.5 billion
Kalyani Group, is a ’Full Service Supplier’ of engine & chassis components.
It is the largest exporter of auto components from India and leading chassis
component manufacturer in the world. With manufacturing facilities spread over
9 locations and 6 countries - two in India, three in Germany, one in Sweden,
one in Scotland, one in North America and one in China, the company
manufactures a wide range of safety and critical components for passenger cars,
commercial vehicles and diesel engines. The company also manufactures
specialized components for the railway, construction equipment, oil & gas
and many other industries. The group is even capable of producing large volume
parts in both steel and aluminum.
Way back in 1961, when Bharat
Forge was born as a company, few could have imagined that the company will go
so far in the future. India was a sheltered and protected economy in those days
and becoming world class was not even a gleam in the eye. India had only a tiny
automobile mantra of import substitution meant that Indian companies - both in
the automobiles and the auto components sectors - constantly lagged behind
international standards. Yet, Bharat Forge, like so many other Indian companies
whose true entrepreneurial energies were hidden till the 1990s, managed to
survive the socialist era of the Indian economy by focusing on quality in its
own way. It is only when liberal economic policies were launched beginning 1991
that a company like Bharat Forge started to find its true calling.
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