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Robert Bosch Engineering, India (RBEI) – An Innovative Frugal Engineering

CASE STUDY, STRATEGIC MARKETING (MANAGEMENT)
'Prin. L.N. Welingkar Institute of Management Development and Research', 16 pages
AUTHOR(S) : Dr. Sonia Mehrotra, Dr. Uday Salunkhe, Dr. Anil Rao Paila (Prin.L.N. Welingkar Institute of Management Development and Research) and Dr. Michael Roberts (Macewan University, Canada)

Case Preview

Robert Bosch Engineering, India (RBEI) – An Innovative Frugal Engineering

 

In January 2014, Arun Kumar Bhat V. S. (Bhat), the General Manager of the Engineering Emerging Market Projects (EME) department at Robert Bosch Engineering and Business Solutions Limited (RBEI), was preparing for his quarterly regional review meeting with the RBEI management. These regional review meetings were an important tool for keeping managers focused on achieving the aggressive productivity targets. The purpose of this review meeting was to discuss each department’s yearly targets and the respective plans to achieve them. As Bhat was confident of his department’s capabilities, he had set EME’s 2014 annual engineering productivity targets 10 % higher than the previous year’s target (Exhibit I). The idea was to improve engineering productivity and thereby deliver more projects at the same cost.

RBEI, one of Bosch group’s six subsidiaries in India, was established in 1998 in Bangalore, India. Since 2004, the EME Department at RBEI had been tasked with  designing and engineering mechatronic automotive products tailored specifically to meet the needs of emerging economies. EME operations were integrated with two other Bosch entities — Robert Bosch Automotive Limited (RBAI), which manufactured its engineered products and Robert Bosch India Limited (RBIN), in charge of regional coordination and external sales of EME’s products. The revenue generated by EME mechatronic automotive products were maintained in RBIN’s accounts (Exhibit II)........................

Emerging Economies and the Need for Frugally Engineered Products

The demographics of the emerging BRICS countries made them attractive destinations for both low-cost manufacturing and as markets (in and of themselves). With large, young, increasingly educated and urbanizing populations, the average household disposable income in these countries had been steadily rising. A 2010 McKinsey Report projected that total consumer spending in the top emerging markets would rise from $6.8 trillion in 2010 to $20 trillion in 2020. Though the individual purchasing power of these new consumers was only a fraction of the consumer purchasing power in developed markets, in aggregate, they represented a market nearly as large as that of the developed markets..............

ROBERT BOSCH GmbH, THE LEGAL ENTITIES RBEI, RBAI AND RBIN

RBEI’s parent company Bosch was set up in Stuttgart in 1886 by Robert Bosch (1861–1942). The Bosch group comprised of Robert Bosch GmbH and its 350 subsidiaries and regional companies spread over 60 countries. The group’s revenue for the fiscal year 2013 was 46.4 billion. Its primary business sectors were automotive technology, consumer goods, industrial technology and energy and building technology. Bosch began manufacturing operations in India in 1953 under the name Motor Industries Company Limited..........

EME, BHAT AND THE NEVER-ENDING CYCLE OF FRUGAL ENGINEERING INNOVATION

The EME Department at RBEI was responsible for software and system development for Diesel/Gasoline Systems (DGS) and exhaust treatment for automobile OEM customers. It had engineering responsibility for Engine Control Units (ECUs) and Denox Control Units (DCUs) for DGS for two-wheel and fourwheel vehicles (both commercial and passenger) in BRICS nations and for the Low-Priced Vehicle Segment (LPV) worldwide. They worked in collaboration with Diesel and Gasoline Systems Electronic Controls (DGS-EC) and regional offices in BRICS countries............

Integrated R&D

To provide frugal product solutions in the automotive domain, it was important for engineers to understand the concept of powertrains in their entirety. Here, RBEI and EME had a distinct competitive advantage over their competitors because of their strong automotive domain knowledge and highly sophisticated..............

Design

The product design for Indian powertrains met international quality standards. In fact, due to India’s poor road infrastructure and tough environment conditions (dust, humidity, pollutants, mishandling of the components at roadside service centres and sub-standard fuel storage tanks), Indian powertrains had to be designed on more stringent norms than international ones. Bhat explained, “ In India, our average vehicle speeds are limited to 10 to 20 kilometers an hour, due to the poor road and traffic conditions.................

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Distribution

The Bosch group had a very good distribution network in India. In Bangalore, RBEI, RBIN and RBAI were located within a 10 km radius. This set-up was not only convenient for their OEM clients in terms of product engineering, manufacturing, maintenance, field support, etc..............

The Way Forward: RBEI’S Expectations and EME’S Challenges

Both RBEI’s and RBIN’s top management saw the opportunity in the emerging markets for mechatronic automotive products. The challenge was to profitably leverage this opportunity by overcoming the external and internal cost and revenue pressures.

In India and other emerging markets, EME’s products were not just competing against competitors’ products, they were also competing for consumers who may be shut out of the market if prices were too high. This was a tricky task as imported components were subject to fluctuations in currency valuations...........

The Automotive Industry and the Competitive Landscape

The Automotive Industry

As a major supplier of powertrains for both commercial and passenger vehicles, Bosch was directly affected by changing trends in the global automobile industry. The global automotive manufacturing industry grew by an average of 4.3% from 2008 to 2012, and had total revenues of over $1.5 trillion by the end of 2012 (Exhibit IV). The global industry was forecasted to grow to $2.2 trillion by 2017...............

Market Trends in Automotive Technology

The automotive industry was ready for a radical change, and Bosch’s management believed that the future was bright for OEMs and automotive suppliers who were ready to embrace technology innovations that would make the auto industry more of a high-tech industry................

Competition

Bosch had several large competitors that operated within the same competitive space. DENSO, headquartered in Japan, had started its Bangalore, India operations in 1984. UK-based Delphi Automotive began its India operations in 2000..........

RBEI’s Competitive Advantage

Bhat believed that RBEI benefitted from the brand equity it derived from Bosch; this gave them a competitive edge as OEMs trusted RBEI’s domain knowledge, technical expertise, pricing flexibility, operational stability and overall capability to deliver. Bosch scored high on its ability to make mechatronic products of a very high quality but at a much lower cost than its global rivals..........

Looking Beyond India

RBIN had successfully marketed EME-engineered ECUs to a whole range of Indian OEMs and multinational OEMs based in India. Their client list included major players such as Mahindra and Mahindra, Tata Motors, Ford India, Hyundai India, and many others..........

Assignment Questions

I. What do you understand by ‘Frugal Engineering’? What is unique to the customer needs in emerging economies? What issues should a MNE manage well for success in emerging economies?

II. How is the process of innovative frugal engineering managed along the automotive value chain at RBEI/EME?

III. How was the market prospect of the automotive industry in India as well as globally? What were their implications for the various value chain players in the industry?

IV.............

Exhibits

Exhibit I: RBEI/EME 2014 Targets

Exhibit II: Organizational Connect between the Three Divisions of Robert Bosch — RBIN, RBAI and RBEI

Exhibit III: Currency Depreciation in Major Emerging Economies (May 2013 to Mid-September 2013)

Exhibit IV: Value of Global Automotive Production Industry (With actual figures till 2013 and projections to 2017)

Exhibit V: Automotive Production in India by Sector and Total Value of The Indian Automotive Production Industry (with actual figures till 2013 and projections to 2017)

Exhibit VI: Digital Automotive Revolution

Exhibit VII: RBEI/EME Competitors Profile

Teaching Note Preview

Robert Bosch Engineering, India (RBEI) – An Innovative Frugal Engineering

 

Synopsis

The case is about Engineering Emerging Market Projects Department (RBEI/EME hereafter referred as EME) of Robert Bosch Engineering and Business Solutions Limited India (RBEI), India. RBEI was one among the six Robert Bosch GmbH- Germany, subsidiaries in India. They had set up operations in Bangalore, India in 1998 as a captive centre of the parent company. For over a decade, RBEI played the role of an extended workbench for the various software and engineering services/requirements of the worldwide Bosch units. Since, 2004 the EME department at RBEI had been tasked with designing and engineering  mechatronic1automotive products tailored specifically to meet the needs of emerging economies. The EME operations were integrated with two other Bosch entities - Robert Bosch Automotive Limited (RBAI) for manufacturing of their engineered products and Robert Bosch India Limited (RBIN) for regional coordination and control and external sales of their products. EME currently had only engineering targets and the revenues generated by EME mechatronic products were retained in RBIN accounts.

Arun Kumar Bhat VS, had taken over as the General Manager of EME in 2010. EME had contributed well to the growth of RBEI and RBIN in the last decade. An important dimension of this success had been their dedication to the process of innovative frugal engineering. Their ability to drive out the unnecessary costs, and engineer robust and quality products to fit the unique demands of the emerging economies was significant to the needs of the entire automotive value chain. Bhat had realized that the ‘low lying fruit’ of frugal engineering had been successfully harvested. To maintain a commitment to driving down costs, there was a need for new external and internal market based solutions. The organizational structures at Bosch India made exploiting the results of their innovative frugal engineering on a global level quite challenging. The question was whether RBEI management was ready for such steps.

Expected Learning Outcomes

  • • The external market dynamics and the internal challenges/implications faced by an established captive division of a multinational enterprise (MNE) for continued success, depicted in the case by mapping EME Department, RBEI
  • • The concept of frugal engineering, its importance/need in emerging economies and the growing significance of these emerging economies as a market in themselves
  • • Examine how organizational structures facilitate or impede a MNEs ability to export product developments that originate in emerging markets into more developed nations
  • • Explore how emerging market subsidiaries, such as those in India, can be a rich source of unique research and development for their MNE network
  • • The importance of location economies when MNEs are developing emerging markets
  • • Gain insight into the changing nature of the automobile industry as it becomes increasingly interwoven with the electronics industry and explore the merging and shifting boundaries of industry

 

Case Positioning and Setting

This case can be used at the Undergraduate, Graduate and Executive Education level courses that have a focus on Emerging Market Innovation and Corporate Venturing by MNEs operating in emerging markets.

Suggested Readings

  • • David Court and Laxman Narasimhan, “Capturing the world’s emerging middle class”, The McKinsey Quarterly, July 2010
  • • Kaushik Mukerjee, “Frugal Innovation: The Key to Penetrating Emerging Markets”, Ivey Business Journal, Reprint9B12TD05, July/August 2012
  • • Kirsten Bound and Ian Thorton, “Our Frugal Future: Lessons from India’s Innovation System”, Nesta, July 2012
  • • Vikas Sehgal, et al., “The Importance of Frugal Engineering”, Strategy+Business, http://www.strategy-business.com/article/10201, May 2010

 

Mandatory Viewing

  • • “Robert Bosch Engineering, India (RBEI): Innovative Frugal Engineering: Personal interview transcripts from conversations with Arun Bhat vs at RBEI/EME”
  • • Secondary data found in industry reports, academic papers, news corporation websites, and business or organization websites

 

Assignment Questions

  • I. What do you understand by ‘Frugal Engineering’? What is unique to the customer needs in emerging economies? What issues should a MNE manage well for success in emerging economies?
  • II. How is the process of innovative frugal engineering managed along the automotive value chain at RBEI/EME?
  • III. How was the market prospect of the automotive industry in India as well as globally? What were their implications for the various value chain players in the industry?
  • IV. ....................

 

Teaching Plan

The teaching plan Exhibit (TN)-I is based on a 90-minute session. The assignment questions are intended to guide the students through the important issues.........

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Abstract


The case study details the situation faced by Emerging Market Projects Department of Robert Bosch Engineering and Business Solutions India (RBEI), India in January 2014. RBEI, one of the Bosch group's subsidiaries in India, was established in 1998 at Bangalore, India. In 2004, RBEI had been tasked with designing and engineering mechatronic automotive products tailored specifically to meet the needs of emerging economies. Operations were integrated with two other Bosch entities, one which manufactured its engineered products and another unit which was in charge of regional coordination and external sales of the product.

An important dimension of this success was their dedication to the process of innovative frugal engineering. Their ability to drive out the unnecessary costs and engineer robust and quality products to fit the unique demands of the emerging economies was significant to the needs of the entire automotive value chain. RBEI, had realised that the 'low lying fruit' of frugal engineering had been successfully harvested. To further maintain a commitment to driving down costs, there was a need for new external and internal market based solutions. The question was whether RBEI management was ready for such steps.

The case study allows one to appreciate the concept of frugal engineering, its importance/need in emerging economies and the growing significance of these emerging economies as a market in themselves. Understanding key functionality and developing one platform for BRIC countries for volume/scale for many small OEMs. Competencies required for end-to-end development (software, hardware and mechanical), validation and manufacturing was key.



Pedagogical Objectives

  • To understand the external market dynamics and the internal challenges/implications faced by an established captive division of a multinational enterprise (MNE) for continued success, depicted in the case by mapping EME Department, RBEI
  • To comprehend the concept of frugal engineering, its importance/need in emerging economies and the growing significance of these emerging economies as a market in themselves
  • To gain insight into the changing nature of the automobile industry as it becomes increasingly interwoven with the electronics industry and explore the merging and shifting boundaries of industry

Case Positioning and Setting

This case can be used at the Undergraduate, Graduate and Executive Education level courses that have a focus on Emerging Market Innovation and Corporate Venturing by MNEs operating in emerging markets.




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