kpc's go-to-market strategy for vestas foreign expansion in india

So IMAGINE.So IMAGINE

KEY POINT CONSULTANTS Defying the status quo.

A large number of people do not have access to stable electricity in IndiaNumber and share of people without access to electricity in 2013:

Source: International Energy Agency

69%Without Access


Leading companies are under performing in emerging marketsThere is opportunity for Vestas to defy the status quo by doing it right

Source: McKinsey (2010)

Leading companies in the developed market earn 17% of total revenues from emerging markets, while emerging markets represent 36% of global GDP.


Overall, emerging-market companies grow faster than those from developed economies

Source: McKinsey


Overall, emerging-market companies grow faster than those from developed economies

Source: McKinsey

HOW CAN VESTAS WIN?

WHERE ARE THE GOOD NEWS?


Revenue increased by 22%, EBITDA increased by 30%, healthy cash flowGross profit margin increased by 28% (not in the graph)

Source: Vestas


Global investments in renewable energy capacity are returning to a steady growth pathRenewable energy capacity investments, 2007-2030

Source: International Renewable Energy Agency (IRENA)


GDP growth varies widely across different Indian citiesTier 1 = >4 million; tier 2 = 1-4 million; tier 3 = 0.5 to 1 million; tier 4 = 0.1 million

Source: BCG


GDP growth varies widely across different Indian citiesTier 1 = >4 million; tier 2 = 1-4 million; tier 3 = 0.5 to 1 million; tier 4 = 0.1 million

Source: BCG

SELECTING THE RIGHT CITY IS CRITICAL

WHAT DOES THIS MEAN?


Our thought processThree integrated strategies reaching for one common goal

WHAT TAKE ADVANTAGE OF INDIA’S GROWTH TO EXPAND

WHYMOVE TO URBAN

CENTRESINDIA IS INVESTING IN RENEWABLE ENERGY

LACK OF ACCESS TO ELECTRICITY IN INDIA

HOW

The BEST.The BOLD. The BRAVE.

Set a bold goal to expand in India.

Be brave and aggressively promote Vestas.

Opportunities for future excellence in off-shore.

WHERE

PROFIT IN 5YEARS EARN A NET INCOME: 5.6M

SURAT CITY IN GUJARAT STATE


Three main pillars of Vestas’ outstanding performance

Sales & Service

Excellence

Research Excellence

Production Excellence

1 2 3


VALUE CHAIN: Sales & Service Centres

Vestas latitude worldwideThe company has covered a lot of ground

HQ EuropeHOME

Austria

Bulgaria

France

Germany

Ireland

Italy

Netherlands

Poland

Portugal

Romania

Spain

Sweden

Turkey

United Kingdom

Denmark

Africa Asia

South Africa China Singapore USA Argentina Australia

India

Japan

South Korea

Philippines

Taiwan Brazil

Chile

Mexico New Zealand

N.A. S.A. Oceania


VALUE CHAIN: Research & development


HQ EuropeHOME

Austria

Bulgaria

France

Germany

Ireland

Italy

Netherlands

Poland

Portugal

Romania

Spain

Sweden

Turkey

United Kingdom

Denmark

Africa Asia


India

Japan

South Korea

Philippines

Taiwan Brazil

Chile

Mexico New Zealand

N.A. S.A. Oceania


VALUE CHAIN: Production


HQ EuropeHOME

Austria

Bulgaria

France

Germany

Ireland

Italy

Netherlands

Poland

Portugal

Romania

Spain

Sweden

Turkey

United Kingdom

Denmark

Africa Asia


India

Japan

South Korea

Philippines

Taiwan Brazil

Chile

Mexico New Zealand

N.A. S.A. Oceania


Diving deep into production

Germany

Italy SpainDenmark China USA

India Brazil

• Blades x2• Control systems• Nacelles x2• Spare parts & repair

• Blades

• Blades• Nacelles

• Blades• Nacelles x2• Spare parts & repair

• GS• Blades• CS• Nacelles

• Nacelles• Blades (2016)

• Blades x2• Nacelles• Towers

• Assembly

HQ Europe Asia N.A. S.A.VALUE CHAIN: ProductionHOME

COUNTRY


Vestas has installed 56, 860 turbines in 75 countriesAll turbines combined produce enough energy to power 80 million homes in Europe

Source: Vestas Financial Report (2015)


Large winds of opportunity lies along the west coast of IndiaMap of India’s wind power capacity vs. GDP Per Capita

Source: Centre for Wind Energy Technology Chennai


Gujarat is the most optimal place to build your plantThere are positive economic conditions and polices that favour Vestas

Market growth driver:Development of wind energy

+

Decadal growth rate of the state is 19%

• Large population and businesses• Growing demand for energy

Wind power industry has grown 82%

• 3,500 MW of wind power produced right now• Gujarat has one of the highest wind energy capacities in the country (9,000 MW)

FOR YOUR REFERENCE

+

SURAT CITY: Tier 2 with 9% CAGR

• India’s best city in 2013• Cleanest, highest per capita income• More than 40,000 industries


Evaluating investment viability in fast-growing economiesUsing our very own GIL analysis for environmental scanning

Government

Infrastructure

Labour

Exemption of the Special Additional Duty (4%)

On all parts and raw materials dedicated for wind turbines

Special economy zones

Lead state in infrastructure sophistication

Highest network density of roads

Widespread access to rail, air, and shipping (biggest port)

Skilled and stable workforce: WPR in Gujarat is 41% vs 39% avg.

Surat city has 87% literacy and 1.26 million are in college (2014)

71,000 seats are in engineering


Vestas is a major player globally, but has opportunity to soar in IndiaA competitive landscape

INTERNATIONAL

VESTAS

SIEMENS

GE

INDIA

VESTAS

GE

SUZLON

GUJARAT

SUZLON

GAMESA

VESTAS

1STBECOME A CATEGORY

WINNER


Go-to-market activation strategyCritical pivot points

RETAIN Technical knowledge and control

NAVIGATE Be able to operate in and around the Indian market

SHOW Long term commitment to the Indian economy through local recruitment and partnerships

INVEST Invest to gain (wind capacity, government benefits, innovation)


Evaluating entry options

Source: Bain & Company


Evaluating entry options

Source: Bain & Company

GREENFIELD


Ramp up manufacturing and increase productivity

OPEN A NEW TOWER MANUFACTURING PLANT ON THE WEST COAST AND A

MUMBAI SALES OFFICE

CAPTURE POTENTIAL

FASTER RESPONSE

RECOMMENDATION BENEFITS

GREENFIELD

FOCUS

WORK WITH STRATEGIC PARTNERS: ESSAR STEEL & GUJARAT LOGISTICS

ESTABLISHED NETWORK

DEMONSTRATES COMMITMENT

STRATEGIC ALLIANCE


A strategy that creates jobs and valueLeverage local university knowledge

Source: IRENA


A strategy that creates jobs for the economy and adds value for the clientLeverage local knowledge and then pass on savings to clients

Source: IRENA

Wind will create 12 THOUSAND jobs by 2030


Hire the best to be the bestPay grants to local universities and recruit from local universities

IIT to hire engineers IIM to hire managers

PRODUCTPRICE


Vestas Solutions and Services covering the entire value chain Energy portfolio management is split into project and operations

Source: Vestas


EXISTING NEWN

EWEX

IST

ING

PRODUCTMARKET

Penetration

Sell more of your product to existing customers & run more ads

Product Development

Develop a new product for existing & loyal customers

Market Development

Introduce your product to a new market or add delivery service etc.

Diversification

Develop a new product for existing & loyal customers


A winning go-to-market activation strategy in IndiaWin with guaranteed product performance and competitive premium pricing

AFFORDABLE

PRICING

V82: $2,300V110: $3,600

CUSTOMIZABLE

PRODUCT SERVICES

MAINTAINABLE

SUBSIDIARY: AVAILON

• Customize the product to fit local consumer tastes & preferences

• Local operations and partnerships allow Vestas to pass on the savings to the client

• V82 – 1.65MW• Outstanding performance• Locally sourced

• V110 – 2.0MW• Advanced• Imported

• Continuous servicing reduces downtime for clients

• Creates greater loyalty for Vestas

PERFORMANCE GUARANTEE CONTRACTS

DISTRIBUTIONPROMOTION


Where is the best location to market Vestas?

SALES OFFICE

SURAT MUMBAI DELHI KOLKATA


Mumbai is a central location with sprawling businessesOpen a retail office to draw in traffic

SALES OFFICE

SURAT MUMBAI DELHI KOLKATA

CENTRALFUTURE POTENTIAL

FUTURE POTENTIAL

FUTURE POTENTIAL


Two team strategy for efficacyTeam 1 for front-end sales and team 2 for back-end support

SALES TEAMHIGH

ENGAGEMENTLOCAL

KNOWLEDGE


FRONT-END

FOCUS

IT TEAMCONTENT CREATION

TECHNICAL SUPPORT

BACK-END


Two team strategy for efficacyTeam 1 for front-end sales and team 2 for back-end support

SALES TEAMHIGH

ENGAGEMENTLOCAL

KNOWLEDGE


FRONT-END

FOCUS

IT TEAMCONTENT CREATION

TECHNICAL SUPPORT

BACK-END

INTEGRATION


TEAM 1: go-to-market activation strategy, think global, act localA high involvement purchase requires a convenient centralized location to meet demands

HOW? WHO?

Open a new sales office in Mumbai

PHASE I: Source local talent & trainingPHASE II: integration & performance incentivesPHASE III: rotational program

IITIIM

Indian clients recognize prestige, build on Vestas brand confidence.

INCREASED EFFICACY + CONVENIENCE OF

CUSTOMER TOUCH POINTS


TEAM 2: go-to-market activation strategy, think global, act local A high involvement purchase requires a convenient centralized location to meet demands

HOW? WHY?

Hire an in-house IT TEAM in Mumbai

PHASE I: Source local talent & trainingPHASE II: integration with sales teamPHASE III: technical support

Faster in-house response to support local sales team

Can create content that is translated in the client’s preferred

language

INCREASED EFFICACY + CONVENIENCE OF

CUSTOMER TOUCH POINTS


Consider the customer life-time valueA push-pull strategy will not only engage with customers, but retain them because you are VERTICAL

Customize offerings and service packages for local preferences

Leverage brand prestige & talent

Sales Force & CRM

C-suite commitment and engagement

IT team creates content to showcase product benefits in the local dialect

Sales team attends four trade shows

FINANCES


Budget summary in USDNew plant in millions, sales team and IT team in thousands

NEW PLANT

Utilities 2.75

20 engineers 0.72

Training 0.05

Salary 48

Construction 55M

SALES TEAM

Utilities 0.8k

Salespersons 144k

Sales executive 60k

University grants 50k

Trade shows 500k

IT TEAM

Engineers 72k

Translator 30k

Content creator 36k

Sales force 0.3k

Training 37.5k

YEAR 1: 107MYear 2 to 8: 52M


Assumptions: sales, COGS, GPM, depreciation, interests, taxes

Note1:Depreciationofthemanufactorywithusefullifeof60yearsandasalvagevalueofUSD10,000,000Note2:Theisnointerestexpensesincetheprojectis100%equityfinancedNote3:BecauseoftheSpecialEconomicZoneAgreement,thecompanywillnotpaytaxesduringthefirst10years

AmountsinUSD Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8Revenues 88,650,000.00$ 147,750,000.00$ 206,850,000.00$ 265,950,000.00$ 325,050,000.00$ 354,600,000.00$ 384,150,000.00$ 413,700,000.00$ COGS 72,781,650.00$ 121,302,750.00$ 169,823,850.00$ 218,344,950.00$ 266,866,050.00$ 291,126,600.00$ 315,387,150.00$ 339,647,700.00$ SG&A 107,466,600.00$ 51,848,300.00$ 51,848,300.00$ 51,848,300.00$ 51,848,300.00$ 51,848,300.00$ 51,848,300.00$ 51,848,300.00$ EBITDA (91,598,250.00)$ (25,401,050.00)$ (14,822,150.00)$ (4,243,250.00)$ 6,335,650.00$ 11,625,100.00$ 16,914,550.00$ 22,204,000.00$ Depreciation 750,000.00$ 750,000.00$ 750,000.00$ 750,000.00$ 750,000.00$ 750,000.00$ 750,000.00$ 750,000.00$ EBIT (92,348,250.00)$ (26,151,050.00)$ (15,572,150.00)$ (4,993,250.00)$ 5,585,650.00$ 10,875,100.00$ 16,164,550.00$ 21,454,000.00$ Interest -$ -$ -$ -$ -$ -$ -$ -$ Taxes -$ -$ -$ -$ -$ -$ -$ -$ NI (92,348,250.00)$ (26,151,050.00)$ (15,572,150.00)$ (4,993,250.00)$ 5,585,650.00$ 10,875,100.00$ 16,164,550.00$ 21,454,000.00$


Assumptions: sales, COGS, GPM, depreciation, interests, taxes

Note1:Depreciationofthemanufactorywithusefullifeof60yearsandasalvagevalueofUSD10,000,000Note2:Theisnointerestexpensesincetheprojectis100%equityfinancedNote3:BecauseoftheSpecialEconomicZoneAgreement,thecompanywillnotpaytaxesduringthefirst10years

AmountsinUSD Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8Revenues 88,650,000.00$ 147,750,000.00$ 206,850,000.00$ 265,950,000.00$ 325,050,000.00$ 354,600,000.00$ 384,150,000.00$ 413,700,000.00$ COGS 72,781,650.00$ 121,302,750.00$ 169,823,850.00$ 218,344,950.00$ 266,866,050.00$ 291,126,600.00$ 315,387,150.00$ 339,647,700.00$ SG&A 107,466,600.00$ 51,848,300.00$ 51,848,300.00$ 51,848,300.00$ 51,848,300.00$ 51,848,300.00$ 51,848,300.00$ 51,848,300.00$ EBITDA (91,598,250.00)$ (25,401,050.00)$ (14,822,150.00)$ (4,243,250.00)$ 6,335,650.00$ 11,625,100.00$ 16,914,550.00$ 22,204,000.00$ Depreciation 750,000.00$ 750,000.00$ 750,000.00$ 750,000.00$ 750,000.00$ 750,000.00$ 750,000.00$ 750,000.00$ EBIT (92,348,250.00)$ (26,151,050.00)$ (15,572,150.00)$ (4,993,250.00)$ 5,585,650.00$ 10,875,100.00$ 16,164,550.00$ 21,454,000.00$ Interest -$ -$ -$ -$ -$ -$ -$ -$ Taxes -$ -$ -$ -$ -$ -$ -$ -$ NI (92,348,250.00)$ (26,151,050.00)$ (15,572,150.00)$ (4,993,250.00)$ 5,585,650.00$ 10,875,100.00$ 16,164,550.00$ 21,454,000.00$

5M IN YEAR 5


Net income for the project

$(92,348,250.00)

$(26,151,050.00)

$(15,572,150.00)

$(4,993,250.00)

$5,585,650.00$10,875,100.00

$16,164,550.00$21,454,000.00

-1E+08

-80000000

-60000000

-40000000

-20000000

0

20000000

40000000

0 1 2 3 4 5 6 7 8 9

inUSD

Time(years)

NetIncomefortheProject


Manage foreign exchange risk through forward contracts and natural hedging

Source: Yahoo Finance

FUTURE


A timeline to Vestas winning strategy

PRIORITY CONSTANT ENHANCEMENT

PHASE I PHASE II PHASE III PHASE IV

STEP INTO INDIA WITH A

BIGGER PRESENCE

EXPANSION OF SALES OFFICES

EXPANSION OF REPAIR CENTRE

OFF-SHORE PROJECTS &

MORE FACTORIES

IMMEDIATE SHORT MEDIUM FUTURE

It’s your time to SHINE


Where Vestas should focus on for India vs. other countries


Investment in supply chain with global footprint High delivery performance while reducing inventory and driving cost out


Where Vestas is todayService recognized as a business opportunity

kpc's go-to-market strategy for vestas foreign expansion in india

Marketing