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PESTEL ANALYSIS

Political Factors: BHEL being a public sector undertaking is greatly influenced by the political forces. There is achange in policies every time the government changes. The business decisions are steered to agreat extent based on the individual preferences of the new leadership. The company does big business overseas and these projects are directly dependent on the incumbent rulers internationaltrade policies. BHEL has, over the years, established its references in more than 70 countriesacross the world, encompassing almost the entire range of BHEL products and services, coveringThermal, Hydro and Gas-based turnkey power projects, Substation projects, besides a widevariety of products like: Transformers, Compressors, and Heat Exchangers etc.The government policies and regulations relating the companys client industries can largelyaffect the future of its business with these customers. For example, power sector has seen amassive growth in the last few years and has been at the top of the political agenda. Now power companies are the major clients of BHEL. Promotion of the sector augers well for theorganization as it can crack heavy deals with these companies. Moreover, the power sector wasderegulated in 2003, which opened doors for the entry of private players in the market.Such entrants can also be potential customers for the company.Being a PSU, it is the preferred choice for the other state-run entities and also the defenseservices. It developed the Automatic storage & retrieval system (ASRS) for storage andinventory management system of the Indian Army. The Company has signed a MoU withAPGENCO for setting up a 125 MW IGCC (Integrated Gasification Combined Cycle)technology plant at Vijayawada. This is an eco-friendly, clean coal technology

Economic Factors: The economic boom in India particularly in the last one decade has played a significant role incharting the success of the company. Lot of Industrialization has been brought about, which hasalways been a catalyst for BHELs sprinting growth. Businesses are dependent on each other for their survival and help themselves flourish mutually. When the economy does well all businessesride up the rising wave. Power Generation is one of the primary indices of a countrys economic development. As of 31.3.2008, BHEL- supplied sets accounted for nearly 64% of the total installed capacity inthe country, contributing 73% of the total power generated in the country. BHEL manufactures and supplies major capital equipment and systems like captive power plants, compressors, industrial boilers, gas turbines, pumps, heat exchangers, electrical machinesetc. to a number of industries like, metallurgical, mining, cement, paper, fertilizers, refineries & petro-chemicals,

etc., other than power utilities. The growth of these industries has multiplied theturnover of the company leaps and bounds in the last few years. Turn key projects are the need of the hour and BHEL has proven turnkey capabilities forexecuting power projects from Concept-to Commissioning. In the area of urban transportation, BHEL is geared up for turnkey execution of electric trolley bus systems, light rail systems and metro systems. Mass transport systems are a must for agrowing economy. Social Factors: In India the whole country and its people are poised for a giant leap towards economic growthand prosperity. People have realized how important it is for the economy to develop for their own betterment. Levels of awareness have gone up drastically and people are much more open toindustrial growth. However, having said that BHEL should also ensure that the companysactions do not come in the way of any of the stakeholders, its decisions are ethical and dontencroach upon the rights of the society. The company should not be negligent towards societalinterests and rights.

Companies are taking more interest in corporate social responsibility these days and stepshave been taken by BHEL too to further the same. Its contributions towards CSR till dateinclude adoption of villages, free medical camps/charitable dispensaries, schools for theunderprivileged and handicapped children, ban on child labor, disaster/natural calamityaid, Employment for handicapped, Widow resettlement, Employment for Ex-serviceman,irrigation using treated sewage, pollution checking camps, plantation of millions of trees,energy saving and conservation of natural resources through environmental management. Companies that are sensitive to the needs and development of the society normally draw peoplesattention and respect faster and can create a superior moral image in the minds of their partnersand clients, the same showing more interest in working with an ethical and socially consciousgroup.BHEL has established the Human Resource Development Institute in Noida, which forms acornerstone of BHELs learning infrastructure. The centre through various HRD efforts ensuresthat Human Capital - is Always in a state of Readiness to meet the dynamic challenges posed by a fast changing environment. This not only helps in achieving the organizational goals, but italso serves as a platform to train aspiring and competent youth of the nation. Technological Factors: BHEL being an engineering and manufacturing giant is to a great degree driven by technologicaldevelopments and innovations and has its earnest efforts directed towards improving itstechnological prowess to meet the changing requirements of a growing economy. At the sametime

the company has to keep pace with the developments happening in its business areas, else itwill be knocked out by the competitors. BHEL has been a leader always and the fact thatIndias first underground metro at Kolkata runs on drives and controls supplied by BHELis a testimony to this.The government is setting up supercritical thermal power plants in the country, eachgenerating around 2500-4000 MW and has plans to come up with many more in the nearfuture. BHEL has developed the technology and capability to produce large capacitythermal sets with super critical parameters to gear up for this requirement. The Company has proven expertise in Plant Performance Improvement through renovation andup-rating of a variety of power plant equipments to improve the performance of existing plants.It has also emerged as a major supplier of controls and instrumentation systems for various power plants and industries.For enhancing the power transfer capability and reducing transmission losses in 400 kV linesBHEL has indigenously developed a state-of-the-art 400 kV Controlled Shunt Reactor for reactive power management of long transmission lines.R&D plays a big role in technological development and BHEL attaches a lot of importance to itall the same. BHELs investment in R&D is among the highest in the corporate sector in India.

Products developed in-house during the last five years contributed 13.80% to the revenuesin 2007-08. Besides this, the company has developed many eco-friendly technologies to serve theenvironment conscious. Environmental Factors:BHEL is an environment friendly company in all its activities, products and servicesbesides providing safe and healthy working environment to all its stakeholders. Thedepleting water and energy resources are a cause of concern for all. BHEL has taken certainmeasures to conserve these precious resources. It has set up rainwater Harvesting Plants andEnergy Conservation Projects utilizing efficient technologies. Proper disposal of Chemical and other wastes is also a major concern for which thecompany has put up Chemical storage and disposal plants. All these projects helped increating pollution free environment, conservation of precious resources like energy, water, fueloil, coolant besides installation of proper system for storage/handling of chemical waste.The company has made the principles of the Global Compact program of the United Nations a part of its strategy, culture and day-to-day operations. Global Compact is a partnership betweenthe United Nations, the business community, international labor and NGOs and has a set of corevalues enshrined in its ten principles on human rights, labor standards, environment andanticorruption. BHEL has been manufacturing and supplying a range of Renewable Energy products andsystems. BHEL is actively associated with the development and adoption of Hydel, WindPower and Concentrated Solar Power (CSP) projects in India and abroad.

It has developeda technology for reduction of NOx gases from coal-based thermal power plant. The company isalso taking active interest in CDM (Clean Development Mechanism) Projects and activities. Legal Factors: BHEL has attained ISO - 9001 certification for quality management and all its manufacturingunits/divisions have been upgraded to the latest ISO-9001: 2000 version. All the major units/divisions of BHEL have been awarded ISO -14001 certification for environmentalmanagement systems and OHSAS-18001 certification for occupational health and safetymanagement systems. The company has to adhere to the scores of legal rules andregulations, the acts, particularly the Companies Act 1956, The Factories Act, theEnvironmental Protection Act, Sale of Goods Act etc .These days no company wants to be unethical in its activities and be on the wrong side of the law books, as the media in India is very active and the smallest of irregularities noticed and reported by them can ruin the image of the company hugely.

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