The Actual and Potential Impacts of Globalisation on Siemens - Assignment Example

?The actual and potential impacts of globalisation on SIEMENS: Evaluation of possible strategies going forward which the company might use to respondto the impacts of globalisation. Introduction Siemens has its operations in 1,640 locations spread in 190 regions across the world. The locational advantage enables Siemens to offer tailor made solutions to its customers in keeping with local conditions. This gives the company a competitive advantage. Siemens has about 336,000 employees today. It also has 176 R & D facilities across the world (WorldwidePresence, n.d ). The 160 year history of Siemens marks the periods of “Beginnings and initial expansion (1847-1865), “ triumph of heavy engineering and internationalisation (1865-1890), “growth through consolidation and partnerships” (1890-1918), “Return to the world market and unity within the ‘House of Siemens’” (1918-1933), “The National Socialist economy and the war years” (1933-1945), “Reconstruction and emergence as a Global Player” (1945-1966), “New markets and areas of business” (1966-1989) and “The age of globalization” (1989-2008) (Siemens-History, n.d). With the 160 years of expertise, Siemens is a world leader as the “21st largest company in the world, the largest company in electrical and electronics sector, 8th largest business in Europe, 6th biggest employer in the world” (Cohen, 2006) employing 426,000 people across 190 countries as per the 2006 estimates. Its global revenues are in the region of € 80 billions, investments on workforce skills about € 500 m per year. The company believes in innovation as a key for business success and claims to generate more than 30 inventions every day (Cohen, 2006). Effects of globalization on firms Siemens claims that by globalization, the global economy has made a full circle as “over centuries, the economy centre of gravity has made a full loop” (Cohen, 2006, p. 9) in its own words. Ever since the company was started in the early nineties, it has been an “export model of democracy, society way of life and economy model” to developing economies. The company adds that globalization reflects people’s aspiration to better standard of living, enables developing countries to add to the GDP . In the process, the elite of the developed countries needs to be educated and infrastructure services have to be developed to “market and social standards”. Globalization has both threats and opportunities for countries and entities that they have to balance them through restructuring themselves stronger than at present. Simens lists “heavy social impact, heavy image impact, challenged service quality, complex reversibility, challenged security management and knowledge evaporation” (Cohen, 2006, p. 11) as threats and “new market access, increased competitiveness, defined formal Special Level Agreements (SLAs) , Information and Communication Technology (ICT), long term partnership, defined policies and tools, reinforced methods and ICT, defined rules and duties” (Cohen, 2006) as opportunities as a result of globalization. These can be tackled by “strong ethic policies, partnerships instead of purchasing and enhancement of governance” (Cohen, 2006) Globalization helps low and high cost countries to benefit through “balancing commercial exchanges and experience sharing” (Cohen, 2006, p. 12). Leverages/strategies to achieve Globalization are “transparency, investments instead of subsidies, sharing instead of concentrating” (Cohen, 2006, p. 12) Strategies Simens claims that their company is well equipped to counter the global challenges by reliance on continued innovation (30 inventions per day!) and differentiation. Its global workforce could be established by capitalising on off-shoring so as to ensure competitive advantage and continuity of the workforce. Globalization brings with it urbanization, with the result, today (2006) there are 280 million people in big cities and the trend is, more people in cities than in rural areas for the first time since 2007. It is expected that the population in mega cities will increase to 350 million by 2015. This is a challenge for infrastructure building. Life expectancy increase and world population increase from 6 billion to 8 billion by 2025 also call for infrastructure and healthcare enhancement. Population of age 80plus set to increase globally evidenced by increase in healthcare costs for industrialized nations from € 2.9 trillion to € 3.8 trillion in 2010. Germany which is the parent country for Siemens spends 10.7 % of its GDP on healthcare. Siemens has emerged as the top most company in health care IT, the leader in imaging systems technology, and a leader in innovation in the health care process. Since globalization has pushed up the energy demand by increase in oil consumption, natural gas and coal, efficient systems and solutions for mining industries have become indispensable. Siemens is a leading solution provider for mining and oil and gas industries. It enjoys no1 position in industry automation. There are 1.2 billion people without drinking water, 2.4 billion people without access to waste water systems and 40 % increase in water consumption has been predicted by 2025 and Siemens today is engaged in water treatment, water distribution, and waste water treatment solutions. In response to increase in power requirement resulting increased energy demand by 40 % in the next 25 years and the risk of increasing global warming, Simens has emerged strong no 2 in power technologies worldwide for fossil fuels, wind power, biomass and fuel cells. It has become a trend setter in intelligent power generation and distribution besides achieving technology for low-loss electricity transport. Per passenger airline mileage has doubled in 2010 from the 1995 levels and Americans alone are held up in traffic jams for 3.5 billion hours per year. In response to this Siemens offers high performance rail systems, telematics solutions, fleet management and communication solutions. Due to the need for more urban security systems and in view of the larger and more frequent evens in mega stadiums, Siemens to supply integrated electronic security systems, ticketing systems and biometric identification systems. Simens have delivery locations at Fuerth, Munich, and Paderborn in Germany, Vienna in Austria, Cork in Ireland, Voronezh in Russia, Toronto in Canada, China, Mason and Chicago in the U.S., Singapore, Bangalore and Chennai in India, Prague in Chech Republic, Bratislava in South East Europe and Istanbul in Turkey. Criteria for selection of delivery locations are the “skill base, cost, language, time zone, stability, and the conditions are ICT, collaborative, knowledge management and workflow” (Cohen, 2006, p. 18). Each of the locations have been preferred for different activities such as customer interaction center, data center , shared service center, application support, application management center and outsourcing transition support, accounting service, inbox services and remote management services (Cohen, 2006, p. 18). Siemens has contributed permanent increase of the local added value at locations in Ireland for Multi-Lingual Service Desk, in the U.K. for BPO for financial services, Siemens UK and the Government, at Veronezh in Russia for HR back-office for Siemems in Germany and HR processes for Siemens companies’ accounts payable and Bratislava for Airline back office for a major European carrier. Besides, it has a help desk for global electronics corporation in Turkey, IT and Business Process Services for Department of labour in South Africa and a BPO for Barclays, reservation center for a major car rental company and accounts payable for Siemens, US in India (Cohen, 2006, p. 19). In terms of employees, sales and major facilities Siemens global presence is shown in the following figure as the evidence of company’s competitiveness. (Cohen, 2006). (Cohen, 2006). Creation of engineering expertise Siemens believes in preparation of engineers to cope with the age of globalization that requires additional set of skills apart from traditional skills. The CEO of the American wing of Siemens Corporation states that the company is at the cross roads in that America is experiencing a quiet crisis as characterized by Dr Shirley Jackson of the vulnerable Rensselaer Polytechnic Institute. That the prominence of America in Science and engineering has been challenged by the emerging countries like China and India. For example the U.S has tuned out smaller number of PhDs in Science & Engineering than Asia and Europe combined. That is out of 114,000 degrees, 89,000 were awarded outside the U.S. Similarly, in Bachelor degrees in Science and Engineering, Asia and Europe turned out 2 million degrees as against 500,000 in North America. China alone produces 400,000 engineers as against 70, 000 by the U.S. The U.S figure is less than 20 % of its 1985 figure. Globalisation has therefore enabled China and India to match quality in goods and services elsewhere in the developed countries. Bill Gates has once said that he would have been happy being born in China rather than elsewhere. It has been estimated that middle class population in China and India combined will hit one billion by 2020. China has the world’s largest cell phone base and third largest car market in the world. These figures present opportunities to companies like Siemens to capitalise on globalisation opportunities. In fact, the CEO has stated that his company is seizing the opportunity for a global approach to innovation so that it can continue to be competitive. The new set of skills required to meet the challenge are “good communication skills in multiple languages, ability to work in teams, cross cultural sensitivity and knowledge, social awareness, capacity to handle complex systems and business acumen and sense of entrepreneurship” (Camuti, 2006). U.K. strategy The U.K. scenario of Siemens is an evidence of its never ending globalization. The company has headquarters at Berkshire, U.K with more than 100 offices and factories. It has a workforce of 21,000 out of whom 5,000 are in the manufacturing activities. It boasts of the fact that no aspect of people’s daily life has been left untouched by Siemens’ products. There is Siemens’ bread toaster powered by electricity generated and distributed again by Siemens. People travel passing through Siemens traffic lights and travel in a Simens train. MRI scans used in the hospitals are the products of Siemens advanced medical imaging technology. The U.K. contributes to global turnover by ? 3 billion and to global profit by ? 96.2 million per year. Its growth in service businesses has been from ? 361 million in 1997 to ? 1573 million in 2005 (TheTimes100, n d ). Specialisation Siemens is multinational. All the CEOs spread across the world must make decisions as to what their separate activities should be. It does not believe in manufacturing all products in all locations so as to achieve economies of scale by specialisation (TheTimes100, n d ). Culture Siemens believes in getting acquainted with local culture rather than thrusting its parent’s country’s culture elsewhere. For example, in the U.K., its employees share their customers’ culture. Its focus is think customer which prompts them to identify with their customers and problems and develop a customer base by solving their problems (TheTimes100, n d ). Competition Globalization has intensified competition between countries for investment. To address this, Siemens has in operation global “centres of excellence” that attends to specialist requirements of the entire group. For example, The Roke Manor Research facility in the U.K. takes care of the whole Simens group whom any part of its business elsewhere in the world can approach for its expertise (TheTimes100, n d ). Globalization and competitiveness Since globalization brings competition from emerging countries known as BRIC countries (Brazil, Russia, India and China), Simens has felt the importance of being globally competitive. In order think and internationally, Simens support customers in all the 190 countries where it has operations including BRIC countries where the company has operation for rover 100 years. The company’s strategy to offer value-creating solutions has created “simplified and streamlined industrial processes”, “building and security technologies that can optimize manufacturing and working environments efficiency”, “water treatment systems for communities to have clean water”, and “networked transportation systems and other mobility solutions” The company’s annual report for 2010 states “we believe that our presence in approximately 190 countries puts us in an excellent position to leverage above-average growth in emerging markets.” (Siemens, 2010). In keeping up with its strategy of focusing on BRIC countries, Siemens foray into those countries is briefly discussed below (UK, already seen above). As seen at the outset, Simens paved ways for its own globalization when it started operating Indo-European telegraph line in 1870s. In 1879, it aligned with Halske and started its subsidiary in Vienna to establish trade in the south eastern parts of Europe. By the year 1914, its work force was about 82,000, 25 % of which were outside Germany. But the World War 1 resulted in destruction and expropriation of majority of all its subsidiaries outside Germany. The companies saw opportunities in destruction by offering development in the public utilities by laying railway network, establishment of postal service and power generation facilities across the world. It regained its world leadership position by 1960s. In 1966, with the convergence of power engineering and communications sectors, its position in the world market became stronger. From 1990s when globalization concept started developing among the world economies, the company changed its practice of dealing with public sectors in regulated markets to start competing globally which also coincided with the pressure from its shareholders to go global. As a result, the company changed its strategies focussing on productivity, innovation and growth (SimensGlobalsiation, n.d.). The U.S. By 2008, the company had completed four years of continued growth by developing the infrastructural facilities in the U.S. especially in power generation which helped the U.S. meet one third of its energy needs. In health care, the company has reached its top most position in the country by generating about 170 million transactions every day for its more 1000 customers (SimensGlobalsiation, n.d.). Brazil In its 100 years of operations in Brazil, it occupies a pivotal position both in energy and healthcare sectors. It contributes almost 50 % of the country’s electrical power. Its industrial solutions are being availed by almost every major industrial facility in Brazil (SimensGlobalsiation, n.d.). Russia It has been active in Russia for more than 155 years, commanding leadership position both in energy and health care sectors with concomitant presence of its own IT solutions and services. It is also modernizing the country’s heat and power plants, assembly conveyor and welding shop and traffic control systems (SimensGlobalsiation, n.d.). China It began its operations in China in 1872 with the first ever delivery of pointer telegraph. Simens has more than 90 places of operations and 60 regional offices in China. In the infrastructure sector, Siemens has constructed a 1,400 kilometre HVDC transmission line form Southwest China to Shanghai besides the world; s highest-capacity baggage handling system at Beijing airport and two environment friendly corex steel production lines in Shanghai (SimensGlobalsiation, n.d.). India The company established its operations in 1867 by laying first telegraphic line between London and Calcutta. In Bangalore, an international airport was started on build and operate basis through public private partnership. Its high-end products were the first to arrive in Indian health care market (SimensGlobalsiation, n.d.). Conclusion From the above facts and figures, it could be seen that Simens has seized the opportunities of globalization more efficiently than the other companies partly because of its strength derived from its continued innovation strategies and partly because of its centuries-old international presence. References Camuti, P. A. (2006). Engineering the Future: Statying Competitive in the Global Economy. Online Journal for Global Engineering Education , 1 (1), 1-6. Cohen, E. (2006). Effects of Globalization on Firms. Siemens overall profile:Retrieved Nov 11, 2011, from Siemens. (2010). Annual Report. Retrieved Nov 11, 2011, from Siemens-History. (n.d). Siemens History Site. Travel back through the history of Siemens: Retrieved Nov 11, 2011, from SimensGlobalsiation. (n.d.). Education › MBA › Organizational Behavior. Retrieved Nov 9, 2011, TheTimes100. (n d ). Meeting global and local needs. Siemens Retrieved Nov 11, 2011, from :< www.tt100.biz> WorldwidePresence. (n.d ). 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