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?
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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