Academic journal article Indian Journal of Industrial Relations

Leveraging Value Chain Competencies & Resources on a Global Platform: The Case of HAL

Academic journal article Indian Journal of Industrial Relations

Leveraging Value Chain Competencies & Resources on a Global Platform: The Case of HAL

Article excerpt


A news which came in all the major financial news papers in the world on 22nd October 2009 in absolute terms changed the image of an emerging economy state-owned aeronautics company. In the history of Boeing this was the first time when the company had signed to supply a very complicated part called flaperons for the Boeing's 777 series commercial jetliners. The 777 flaperon is a complex composite assembly that is instrumental in controlling the airplane's and maneuverability in flight, referred to as a 'control surface', flaperons work both as an aileron to control roll as a flap to control lift. Boeing had earlier signed a 10-year manufacturing contract ($1 billion or Rs. 4,650 crore) in December 2007 with Hindustan Aeronautics Ltd for making subsystems for its fighter planes such as F-18 Super Hornets and Apache helicopters. "HAL and Boeing share a very special relationship. Showcasing HAL's composite manufacturing capability on one of the world's premier long-haul commercial jets positions us for even greater opportunities at the forefront of technology," said Soundara Rajan, Director, Corporate Planning & Marketing, HAL (Boeing, 2009). Boeing's relationship with HAL dates back to 1991. Boeing India President Dinesh Keskar said "The composite 777 flaperon that HAL will produce represents a significant leap forward in technological capability, and supports Boeing's strategy to work in partnership with India's aerospace industry for the long-term". (Boeing, 2009)

It was a long way for a 100 % Government of India owned strategic defense industry company to achieve. As on 2010, HAL has 19 production units and 9 research and design centers in 7 locations in India. It has sold its products in more than 20 countries. The company has total 26 types of aircrafts. Out of which 12 types of aircrafts have been manufactured using in-house R & D and 14 types produced under license. By 2010 March, HAL had manufactured more than 3550 aircrafts, 3600 engines and overhauled over 8150 aircrafts and 27300 engines. HAL is the largest player in the Aerospace industry in India. HAL supplies its products to all the three major defence wings in India namely, Army, Navy and Air force. To maximize its resources usage, building synergies and minimizing risks and increase revenues, HAL entered Civil Aviation with launch of Dornier (14 seater) and civil versions of Advanced Light Helicopter.

How does an emerging economy company, which is in a strategic industry, chart its global strategy, why and how? We would be looking at the outside in approach (PEST and industry forces) and inside out perspective (resource and value chain perspective). We discuss how an emerging economy, strategic industry company has transformed itself and grew in the international arena. Government of India has defined all the institutions and government owned companies in Defence Department and Space Department as strategic institutions and allowed 26% FDI in the defence production space with some restrictions. There are around eight defence public units. As can be seen from table 1 HAL is the largest public sector unit (PSU) in terms of turnover and exports volume.

It is clear that HAL is the largest defense public sector and has exports turnover of 4365 Million Rupees. Other public sector units do not have any exports and even if they have some exports it is more of trading. The above are the reasons that we have taken HAL as the study point in industry international strategy in emerging economies.

Aeronautics Industry

In the commercial aircraft industry, the competition is immensely intensive even though it is mainly between Boeing and Airbus. Economies of scale in the commercial aeronautics industry comes from the ability to spread fixed costs over a large output. Boeing is spending an estimated $5 billion to develop its Boeing 777 jetliner. Boeing needs to sell around 300 aircrafts to get respectable amount of profit. …

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