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COMPETITIVE STRATEGY

Tata Solar- A Dawn under the Sun �

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Submitted by: EPGDIB 2014-16_Group7 Akshay (4A) | Sachin (36A) | Kavita (19A) | Shiv (40A) | Ashirvad (9A) | Rakesh (30A)

Contents:

1. What is Completive Strategy?

2. Background

3. What is Solar Energy? 4. Solar Power in India

5. Tata Power Solar – An Introduction

6. How Tata Solar Follows Competitive Strategy?

7. Competitors

8. Various Strategies Followed by Tata Solar

9. Pest Analysis

10. Porter’s Five Force Analysis

11. Tata Solar SWOT Analysis

12. Accounting Information

13. Strategic Recommendations

14. References

1. What is Competitive Strategy? Competitive strategies are the method by which you achieve a competitive advantage in the market. A firm's relative position within its industry determines whether a firm's profitability is above or below the industry average. The fundamental basis of above average profitability in the long run is sustainable competitive advantage. Before devising a competitive strategy, one needs to evaluate all strengths, weaknesses, opportunities, threats in the industry and then go ahead which would give one a competitive advantage. According to Michael Porter, competitive strategy is devised into 4 types:

Cost Leadership In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of cost advantage are varied and depend on the structure of the industry. They may include the pursuit of economies of scale, proprietary technology, preferential access to raw materials and other factors. A low cost producer must find and exploit all sources of cost advantage. If a firm can achieve and sustain overall cost leadership, then it will be an above average performer in its industry, provided it can command prices at or near the industry average. Differentiation Leadership In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers. It selects one or more attributes that many buyers in an industry perceive as important, and uniquely positions itself to meet those needs. It is rewarded for its uniqueness with a premium price. Cost Focus In cost focus a firm seeks a cost advantage in its target segment. Cost focus exploits differences in cost behavior in some segments. Such strategy helps firm to satisfy sufficient consumers and gain popularity.

Differentiation Focus In differentiation focus a firm seeks differentiation in its target segment. Differentiation focus exploits the special needs of buyers in certain segments. This type of differentiation is made to meet demands of border customers who refrain from purchasing competitors’ products only due to missing of small features. It is a clear niche marketing strategy. 2. Background India’s strong economic growth, combined with country’s industrialization, increasing population and increased access to power has led to rising demand for power in the country. The need for renewable energy is obvious in today’s world. The problem is trying to get as many people as possible to recognize the need and to spend their hard earned money on this technology. 3. What is solar energy? Solar energy is, simply, energy provided by the sun. This energy is in the form of solar radiation, which makes the production of solar electricity possible. Electricity can be produced directly from photovoltaic, PV, cells. (Photovoltaic literally means “light” and “electric.”) These cells are made from materials which exhibit the “photovoltaic effect” i.e. when sunshine hits the PV cell, the photons of light excite the electrons in the cell and cause them to flow, generating electricity. Solar energy produces electricity when it is in demand – during the day particularly hot days when air-conditioners drive up electricity demand.

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4. Solar Power in India Globally, the solar power industry has been growing rapidly in recent years. In 2010, an estimated total capacity of 17,000 MW was installed globally. Solar radiation over India is 5000trillion KWH/year; in most parts of India, clear sunny weather is experienced 250 to 300 days a year. The country receives more than 4kWh/m2 /day. Major states put together then 979.4MWp is the total amount of energy derived in form of solar. Thus this puts India amongst the highest solar radiation receiving countries of the world. Solar power from SPV (Solar Photo Voltaic) system and solar concentrating system is produced in environmental friendly manner, does not generate any waste or pollution, and meets the energy requirement in domestic sector in decentralized manner quite efficiently. The exhibit below captures their estimates about solar market in India; which shows that there is a steady growth in the solar market after 2017-22 �

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5. Tata Solar Power – An Introduction

Tata Power Solar is India’s largest integrated solar company that is driven by the singular vision – harness the power of sun to enable solar everywhere. Headquartered in Bangalore, Tata Power Solar operates in three distinct segments – cutting-edge manufacturing, EPC services for solar power projects and creating innovative solar products. Tata Power Solar with 25 years of deep domain expertise, is one of the pioneering solar manufacturers in the world and India's largest specialized EPC player. The company has more tha118% growth in 2104 as compared to 2013. Tata Solar Power- Vision and Mission Vision: To be the most admired and responsible Integrated Power Company with international footprint, delivering sustainable value to all stakeholders. Mission: To earn affection of customers by delivering superior experience and value, thereby making them our ambassadors. Driving competitiveness by operating our businesses at benchmark levels. Executing projects safely with predictable benchmark quality, cost and time. Growing profitably across the power value chain and allied areas, in focus geographies. Being the lead adopter of technology with a spirit of pioneering and calculated risk taking. Practicing ‘Leadership with Care’ by pursuing best practices on Care for our Environment, Community, Customers, Shareholders, People and creating a culture that will reinforce our values. Enable employees and associates to achieve and unleash their full potential to deliver outcomes in a sustainable way.

6. How Tata Solar Follows Competitive Strategy? Tata Solar targets the mass market with its products, but combines this broad scope with a differentiation strategy based on design, branding and user experience that enables it to reach the Indian common man. Tata Solar has a generic cost leadership and product differentiation strategy in the solar energy industry. The current strategic goals of Tata Solar are market diversification and operations expansion. Consumer categories: -Domestic -Agricultural Solar powered equipment is more environmentally friendly and economical in its operation compared to equipment’s powered by an internal combustion engine (ICE) or nuclear power. For irrigation and drinking water solar PV water pumping systems are used in India. Solar water pumping system works on power generated using solar photovoltaic system. The solar energy is converted in to electricity by using a photo voltaic array. � The residential consumer category contributes to about 29 percent of the total Indian Power requirement; this is expected to increase to 34 percent by 2021-22, according to KPMG report. It is expected that high-end residential consumers will be proactive in adopting solar rooftop given their higher power tariffs. A large number of these consumers are likely to start adopting solar power from 2017-18. However, government involvement will be required in encouraging non-high-end residential and agriculture consumers to use solar power. Solar Market Segment: -Grid Connected Solar Potential -Off-Grid Connected Solar Application Potential -Solar Water Heater (SWH) Grid Connected Solar Potential includes; Residential Rooftops and Utility Scale Solar power (CSP and PV). And Off-grid connected Solar Application Potential includes; Solar Powered Agricultural Pump sets and Solar powered Telecom towers. In the off-grid space, solar power is already cost competitive with alternatives in certain applications. For example, telecom towers are an attractive market for solar PV installations. And Solar Water Heating (SWH) applications could be used in residential, commercial as well as industrial sectors

Tata Solar Objectives Focus on retail customers in metros, Refineries, Ports, Government Funded Projects to start new plant and to increase market share, it is essential to increase production capacity. Focus on both domestic and international markets. Nearly 75% of sales is achieved from exports to Europe and USA. Product Innovations Tata Solar product portfolio embraces more than 60 models today, ranging from Rooftops to solar pumps. Sunjevini a power converter that charge your converter with solar energy, Tata Solar Dynamo roof top solar power generators Product Differentiation Tata Solar reaches Indian mass and industries by launching new and innovative products since inception. It has many first to its credit like Solutions for Consumers

Solution for Consumers Power cuts, rising bills and, in some cases, no electricity at all. From big cities to remote villages, every home today is facing at least one of these challenges. At Tata Power Solar, we have developed an array of solar lighting, heating and power backup products that are reliable, affordable and green

Solutions for Business Tata Power Solar, we are at the forefront of this mission – provide sustainable solar solutions. Tata have helped countless businesses benefit from these policies while attaining their sustainability goals for the past 25 years, our pursuit to enable solar continues like- Turnkey solar solutions, Customized systems for unique challenges, A promise of No CAPEX and a low OPEX, Meet Solar RPO & REC regulations, Profit from power, Industry leaders trust Tata Power Solar. Programs with governments Partnering with multiple government and non-profit agencies, Tata Power Solar has played a pivotal role in making electricity accessible in off-grid villages, low-income homes and isolated regions across India. Solar Projects with Power Producers Tata Power Solar can design a fully integrated and customized solar power plant project for you. We have the prowess to manage solar energy projects of such scale and the much-needed know-how to work within the confines of regulatory policies or the geography constraints.

Globally Trusted Module Tata Power Solar, a pioneer of the solar industry offers a broad range of photovoltaic solar modules that feature high efficiency and best-in-class manufacturing edge. With an in-house production capacity of 200 MW for modules and 180 MW for cells, our broad range of solar energy panels and modules are among the top tier PV panels available to multiple customer segments including industrial, commercial, both on-grid and off-grid solar projects and residential. Target Markets

Who? Where are they? How many? Motivation

House Owners Millions of domestic roofs and developers / architects of new buildings.

Reduce electricity costs Contribute to carbon emission reduction Take advantage of other incentives Increase value of property

Councils Many councils who own buildings with large roofs - schools, admin buildings etc.

Reduce electricity costs Comply with carbon emission targets

Corporations Many companies with large roofs

Reduce electricity costs Display corporate social responsibility Gain emission credits

Land Owners / Project Developers

Sell electricity Sell carbon emission allowances

Electricity Companies

Big companies, often globally operating.

Spread energy mix Comply with regulation Would otherwise have to buy carbon emission

credits (in the EU)

Consumer

Use solar powered lights or charges instead of oil lamps (especially in developing countries or remote areas)

Use solar powered products for novelty val

Tata Solar Distribution Networks Apart from the Product, Price and Promotion Tata Solar has shown strength in another significant aspect that is distribution network. Achieving supply chain superiority or excellence is within the reach of any company. However, it requires a vision, as well as the organizational imperative and willingness to invest in the right direction. For the B2C model, higher margins up to 15 per cent were offered to the dealers, which was higher than the industry average of 6 per cent to 10 per

cent. This helped them penetrate the market deeper into the urban markets. In B2B model, where corporate selling was involved, tie ups with major corporate houses saved the margins of the distributors and Tata Solar could provide the corporate houses a lesser price than the market. Thus, the target market of professionals was reached. 7. Competitors * Azure Power * Bharat Electronics Limited (BEL) * Bharat Heavy Electricals Ltd. (BHEL) * Central Electronics Ltd. (CEL) * HHV Solar Technologies Private Limited * Micro Sun Tech Private Limited * Moser Baer India Limited * Photon Solar Energy Systems * Punj Lloyd Delta Renewables * Reliance Industries Solar Group * Renewable Energy Systems Limited * Solar Semiconductor * Sun Energy Systems * TATA BP Solar India Limited * Titan Energy Systems Limited * Titan Energy Systems Ltd. * TRA International * Waaree Energies Private Limited * Webel SL Energy Systems Ltd. * XL Telecom & Energy Limited 8. Various Strategies Followed by Tata Solar Products Goods: panels, transformers, inverters, necessary construction equipment. In the proposal include all the equipment needed, spec sheets, and warranty info to better inform the client of what they are buying. Services and ideas: have expert and experienced salespeople, engineers, and installers. Perform analysis of the property and financial implications of the purchase. Perform maintenance at no charge if anything breaks. Price Give the customer a detailed accounting of all equipment and service fees, tally it up, and come up with a total. This total is usually pretty high. Use marketing to

get the client to think of the purchase as an investment, rather than a huge expense. Place Salespeople need to be available to travel to the individual sites to perform the analysis, and go wherever they need to close the sale. Promotion Tata BP Solar has embarked on an extensive retail distribution network, named Project Disha, to reach out to customers across the country and overseas Advertising: newspaper, TV, radio, billboards, anything to get your message across Personal Selling: very important. Solar Panels are complex and customized. Meet face to face with the potential buyer to understand their goals and resources. Give them immediate feedback. Public Relations: media is constantly reporting about new developments in the renewable energy industry. Informs the public of the benefits of solar without having to spend money on advertising. Sales Promotions: Direct marketing: uses direct communication to generate a response in the form of an order or a request for further information. Tata Solar Collaborations - Transphorm Partners With Tata Power Solar to Introduce India’s Most Efficient Solar Inverter. - DuPont is collaborating with Tata Power Solar to provide a safer, more efficient, reliable and cost-effective alternative to kerosene lamps for home lighting in areas such as Uttar Pradesh, where the electricity supply is unreliable. - Tata Solar working on Indo-China partnership for solar energy - Tata Power Solar, Manipal varsity unveil solar car prototype

9. Tata Solar PEST Analysis

PEST Analysis

Political

The government has huge presence in the Solar Energy market. It regulates the market through MNRE (Ministry of Renewable Energy) and financial assistance is provided by IREDA (Indian Renewable Energy Development Agency Limited). IREDA has come up with several schemes to not only encourage the use of solar-powered systems, but also facilitate businesses in the arena. setup. (MNRE) provided financial assistance to the installation of around 33 grids of solar photovoltaic power plants, companies engaged in R&D in solar power are also offered several subsidies and tax exemptions.

Economical

In the recent round of reverse auctioning process for the solar projects under the National Solar Mission, the price discovery for levelized tariff was in the range of INR 10.49/kWh to INR 12.24/kWh for solar-thermal and between INR 10.59/ kWh to INR 12.76/ kWh for solar PV projects. The budgets has also encouraged private solar companies by reducing customs duty on solar panels by 5% and exempting excise duty on solar photovoltaic panels. The government has initiated a Renewable Energy Certificate (REC) scheme, which is designed to drive investment in low-carbon energy projects.

Social

There are two overall forces in the social environment that are influencing the growth of the renewable energy industry: increasing environmental concerns and increasing energy demand. Growing environmental awareness which is defined as the increasing knowledge and understanding of the finite nature of many of the world’s resources, the negative impact and contribution to climate change from burning fossil fuels and deforestation, and the impact of global warming on biodiversity, and the stability of delicate ecosystems, have led to increasing environmental concerns.

Technical

Technological developments and investments catalyze the advancement of technology, strengthen the ability of energy consumers to harness solar energy, and improve manufacturing equipment and techniques that enable low cost production. In addition to emerging technology, future technology being aggressively pursued by research and development include thermal and electrical storage systems, solar hybrid lighting, improved manufacturing techniques, nanotechnology, and improving concentrating solar power systems.

10. Tata Solar Porters 5 forces Analysis

Suppliers Power: Solar technology has oligopoly characteristics dominated by a small number of players, but then with government intervention and rising awareness the price of solar energy is coming down. The time taken to reach grid party would also depend on the bargaining power of the developers. Degree of influence exerted over the industry by the suppliers: -Product is unique and scarce, -Suppliers are more concentrated in the European market because of better technology. -High switching costs for the firm in the industry is high. The Suppliers of the solar energy supplies also too many industries; like rural, agriculture, hospitals, hotels, etc. There is no substitute product for solar. The product is critical for the company. Buyers Power: The industry’s major power lies within the buyers’ side. Since the awareness in the market is very low, only a small part of residential segment i.e. high end residential consumers is the pro-active group. But for the non-high end residential consumers’ government’s role will be important. Degree of influence exerted over the industry by the buyers: -Forcing down the prices, since the consumers are price sensitive -Consumers are demanding in terms of value-added, higher quality -Low switching costs for the buyers -Substitute products are available

Threat of New Entrance: The threat of new entrance is not that prominent now but it will be high as soon as grid parity is reached. Since the solar prices are coming down and the support from the government will be the major driver in this regard. Now the segment has high entry barrier but not very low exit barrier so the segment is attractive. The exit barrier is expected to go down after the grid parity is reached. Degree of influence exerted over the industry by the threat of new entrance, are: -Low scale of economies before the grid parity. -The technology is not protected. -Product is not differentiated. -Government policy makes the entry barrier lower but after the grid parity it is expected to go down. -The major barrier to entry is the distribution channel. Threat of substitute product: Another prominent power in the industry is the threat of substitute. The substitute i.e. conventional sources of energy are already present in the market and it is dominated by them. Degree of influence exerted over the industry by the threat of substitute product, are: -There are many substitute products available -Customers’ switching cost is low as they can easily switch over to them as there price is less. Industry Rivalry: The intensity of rivalry from the direct competition i.e. companies dealing in solar equipment, is low but from the indirect competition i.e. companies dealing in conventional residential pump it is very high. Degree of influence exerted over the industry by the industry rivalry, are: -Market is crowded with indirect competition from indirect competition but with some direct competition. -Switching cost for the consumers for the conventional market is low. -Some prominent companies in the solar market, whose brand image is much higher, like Reliance, Mahindra, BHEL, Moser Baer, etc. Solar power has tremendous potential to meet almost 7 percent of our power needs by 2022, mitigate 2.6 percent of our carbon emissions in that year and save over 71 MTPA of imported coal in that year (equal to USD 5.5 bn of imports). The imperative for action today is strong and therefore is the case for persistence and consistency on part of the Government. For the industry, this represents a significant investment opportunity. Investment opportunities across the value chain from manufacturing to EPC to project development over the next decade.

11. Tata Solar SWOT Analysis

SWOT Analysis

Strength

First established manufacturer in the country. Beneficiary of major Solar lighting system schemes Warranty of upto 5 years is a major benefit Manufacturing plant based in the country Huge supply network and service facilities. Quality of the products manufactured is durable

Weakness

Limited portability of products available. Products limited for indoor use mostly Poor efficiency of the solar panels as compared to competitor products. Portable product market yet to be tapped. Present systems utility limited to lighting and heating. High cost of the product.

Opportunity

Existing supplier network be strengthened. Supply from Tata subsidiaries for component could improve margins To expand its product mix. Use of its R & D Centre’s for development of newer cheaper products.

Threats

Chinese solar lighting products providing cheaper alternatives For water heating, biogas is another cheaper option compared to solar water heating systems. Newer and bigger entrants like Philips entering the solar lighting system market

12. Financial Performance and Sales:

13. Strategic Recommendations The key driver of the growth of this sector is the concept of Grid Parity. This refers to the point when the cost of the solar power equals the cost of conventional power. In the exhibit below, it shows a band representing solar rooftop costs. The band variation signifies the margins, i.e. the difference between cost and price (includes margins across the value chain). It is expected that the solar tariff to lie anywhere within this band depending on the bargaining power of the developers. And India will reach its grid parity by 2019-20. In order to meet the rapidly growing electricity requirements in coming years, Tata Solar have to focus on following:-

1. Improve the cell efficiency and production cost. 2. Increase the plant capacity to cater market demand. 3. Company to reach out to as many people and organizations as possible to

through different marketing media. 4. Promote Single Axis Tracking System technology, used to track the sun

movement – improve 20% solar power 5. Promote low cost solution to convert existing inverters to solar. 6. Invest in R&D for cost effective technologies and increase the segment –

like developing the Solar Water Purifiers. 7. Cost reduction is achievement of economies of scale 8. Technological advancements 9. Emergence of low cost manufacturing locations.

14. References

1. www. moneycontrol.com 2. www. tatasolar.com 3. www. bridgetoindia.com

4. http://www.renewableenergyworld.com 5. Google finance 6. Mercom Communications India 7. MNRE (Ministry of Renewable Energy) 8. IREDA (Indian Renewable Energy Development Agency Limited).