In our previous article, we had done a detailed SWOT analysis of Enel, an Italian Multinational Electricity & Gas Utility Company. In this article, we are going to explain the SWOT analysis of Varroc Engineering.
Varroc Engineering is an automotive component manufacturer of exterior lighting systems, powertrains, electrical, electronic, and body parts for passenger cars and motorcycles in nearly every country. The company was founded by Tarang Jain in 1990 and is presently headquartered at Aurangabad in Maharashtra, India with 35 manufacturing installations and 11 engineering hubs in 10 nations across three mainlands.
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Now, we will discover strengths, weaknesses, opportunities and threats covering Varroc. Before we delve into the SWOT analysis of Varroc Engineering let’s learn about the company, its history, products, services and competitors.
About Varroc Engineering
(The Founder of Varroc Engineering, Photography: Sanjay Chube)
Started as a polymer business in 1990 by Tarang Jain, today the business is known as a global tier-1 manufacturer of automotive components and the first largest as an auto component group in India. The company has grown itself out of the bar of excellence through continuously introducing emerging technologies in automotive components.
The headquarters of Varroc Engineering is located in Aurangabad, Maharashtra, India. In the 3 decades of its journey, the company had tie-ups and acquisitions with many external businesses in European markets, Turkey, Morocco and Brazil to strengthen forging business.
Varroc Engineering designs and manufactures exterior lighting systems, plastic and polymer components, electrical-electronics components, and precision metallic components. These automotive components are then supplied to car manufacturers to install in passenger cars, commercial vehicles, two-wheelers, three-wheelers and off-highway vehicle (“OHV”) OEMs.
|No. of Employees||13,800+|
|Market Cap||Rs 4,410 Crore (2022)|
|Annual Revenue||$1.8 Billion (2021)|
|Net Income/ Profit||Rs 111.42 Crore (2021)|
Products of Varroc Engineering
Varroc Engineering has been a global marketer since 1990 and deals in the following businesses:
- Lighting Systems
Competitors of Varroc Engineering
Competition among businesses may lead to the development of new or improved goods, as well as more efficient operations. Varroc Engineering has a few major rival companies around the globe. Some of the top competitors are
- FIEM Industries Ltd.
- Jagan Lamps Ltd.
- Lumax Industries Ltd.
- Uravi T & Wedge Lamps Ltd.
Now that we know about the company’s history, its products, and its close competitors, we can move on to the SWOT analysis of Varroc Engineering.
SWOT Analysis of Varroc Engineering
A SWOT analysis examines the strengths, weaknesses, opportunities, and threats that a firm faces. SWOT Analysis is a tried-and-true tool that enables a company like Varroc Engineering to compare its business and performance to that of its competitors.
It will give us a strategic analysis of its internal and external environment, which is crucial for understanding the SWOT Analysis of Varroc Engineering.
To better understand the SWOT analysis of Varroc Engineering, refer to the infographics below:
Below is an explicit guide to the SWOT analysis of Varroc Engineering.
Strengths of Varroc Engineering
Varroc Engineering, being one of the leading companies in its industry, has several benefits that help it flourish in the marketplace. These strengths not only help it retain market share in existing areas but also help it break into new ones.
- Global Operations: Varroc Engineering has 35 manufacturing facilities and 11 engineering centres in 10 countries across three continents including India, Europe, Morocco, Brazil, Poland and many other countries.
- Major Distributor: Varroc Engineering is one of the major distributors of exterior lighting systems, plastic and polymer components, electrical-electronics components, and precision metallic components. Its lighting systems and components are used by some of the major automotive manufacturing companies like Volvo, Eicher and Mahindra.
- Mergers and Acquisitions: A track record of successfully integrating additional companies through mergers and acquisitions. Over the past few years, the owner has successfully integrated several technology companies to optimize operations and establish a stable supply chain. Acquisitions include IMES Italy in 2007, TRIOM in 2011, Visteon’s Global PV Lighting Business in 2012 etc. and many more.
- Operates in Various Industries: The main USP of this company is to provide automotive components for passenger cars, commercial vehicles, two-wheelers, three-wheelers and off-highway vehicles (“OHV”) OEMs. Apart from these, Varroc Engineering also shows its interest in the Metallic and polymer business as a supplier of essential machined forgings and engine valves.
- Leading Market Position: Varroc Engineering holds the second largest Indian auto component group position for automotive components. Since its inception the growth enabled the company to create a new revenue stream and diversify the economic cycle risk in the markets it serves, propelling Varroc Engineering to the top of the Indian market.
- Highly Qualified Workforce: Through training and learning initiatives, Varroc Engineering has been able to develop highly qualified 1500+ R&D engineers. Varroc Engineering devotes significant resources to employee training and development, resulting in a team that is not just highly competent but also driven to attain greater success.
- Awards & Recognition: Varroc Engineering has been recently awarded the ‘New Part Development Award’ by Honda Motorcycle and Scooter India Private Limited in 2019. Other than this since 2014 the company has achieved many awards and recognitions.
Weaknesses of Varroc Engineering
Varroc Engineering’s weakness is an area where he can improve. Strategy is about making important decisions, and weaknesses are areas where a company could improve with the help of a SWOT analysis.
- Falling Shares: The company shares have been falling consistently since last year’s Q4 cycle. The company has seen a 52-week low hit on growth, approximately an 18% dip in one month.
- Declining Annual Net Profit: By looking at the company’s cash flow statement, we can determine that its annual net profit has been declining for the last 2 years. Also, the company has not published their financial statements since 2019.
- Deteriorating Book Value Per Share: During the past 12 months, Varroc Engineering’s average Book Value Per Share Growth Rate was -3.40% per year. During the past 3 years, the average Book Value Per Share Growth Rate was -1.90% per year.
- Expenditure on Building Fresh Supply Chain & Logistics Network: AI has significantly modified the business model in the technology industry and hence, Varroc Engineering has to build a new expensive supply chain network.
- Sloping Market Share With Rising Revenues: The electronic industry is growing faster than the company itself making it challenging to analyze the trends within the technology sector.
- Components Can Get Readily Copied: Varroc Engineering’s business model is the issue to address which can get easily copied by its competitors. The organisation must develop a platform model that can combine suppliers, vendors, and end-users to ensure a secure supply chain.
- Less Investment in New Technologies: As the company embarks on its next phase of expansion, it needs to invest in new technologies that can help it achieve its goals. Currently, investment in technology does not meet the ideas that a company has.
Opportunities for Varroc Engineering
Opportunities are possible areas for a company to consider to improve results, sales, and, ultimately, profit. Varroc Engineering includes the following opportunities:
- Stable Free Cash Flow: The stable cash flow provides opportunities to invest in adjacent products. Hence when more cash is with the company can think of some new technologies and product segments to increase the market share.
- Technological Advancements: The new technology provides an opportunity for Varroc Engineering to practice a differentiated pricing strategy in the new market. It enables the firm to maintain its loyal clients with great service and lure new clients through other value oriented propositions.
- Diverse Client’s Preferences: With easy access to information, and quick adoption of technology, clients nowadays are more willing to experiment with new products in the market. Varroc Engineering has to carefully monitor the wider trends within the technology sector to meet such client desires.
- Heavy Government Regulations: With increasing government regulations, unorganized players who are producing automotive components are finding it difficult to operate in the automotive industry, providing Varroc Engineering with an edge to grow the customer base.
- Acquisition Synergies: As we know, the company is forward in terms of acquisitions and mergers. Acquisitions are a good way of expanding an ongoing business with the help of another one by utilizing its resources.
Threats to Varroc Engineering
External environmental factors that can harm Varroc Engineering’s growth are known as threats. Varroc Engineering’s threats include the following:
- Saturation in Urban & Stagnation in Rural Markets: It is extremely costly to serve rural customers due to the vast distances and lack of infrastructure. Secondly, for Varroc Engineering it is a persistent challenge in the automotive segment as the adoption of products is lagging in the rural market.
- Strong Rivalry from other Components Providers: There is a lot of competition in the industry these days. This affects prices, resulting in a drop in revenue or income for Varroc Engineering.
- Threat from Local Distributors: Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors. Also, local distributors like repairing centres and garages are selling duplicate lighting components in the name of Varroc Engineering which is again another threat for the company.
- Country-specific Regulations: Each country has a different set of rules and regulations regarding the transportation of goods. Some goods have very strict restrictions in some countries making it difficult to transport them.
This ends our complete SWOT analysis of Varroc Engineering. Let us conclude our learning below.
Varroc Engineering runs the business of polymer, electrical electronics, metallic, and lightning systems. The company has continued to grow since 1990 when it was first established. It has zero promoter pledge and is overbought by the money flow index. However, financial performance can play a big role in Varroc Engineering’s future so it needs to seriously consider options to improve itself financially.
The company has outperformed its rival competitors with its incredible marketing efforts in branding. With the increasing competition and advancement in technological expertise, digital marketing plays a vital role in boosting traffic, if the company gets better visibility, sales and revenue will eventually increase.
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