Strategic Management of Siemens - Case Study Example

Strategic Management of Siemens Name: Tutor: Course: Date: Executive Summary Siemens is involved inproduction of coal power, hydro, and renewable energy power. Based on this understanding, the company has the necessary capital and human resources to diversify and provide green energy which is the in-thing in the current climate change discourse. With a solid financial base it can invest in systems that can expand its market share. Siemens group is a subject of legislation in any country in which its operations are based. The head office in Germany is controlled by both German and European Union laws. It must also comply with British legislation if it is to continue operating in the UK. Siemens Group is susceptible to currency fluctuations, exchange rates, taxation, interest rates and inflation between the Euro and Dollar. Since the company has great business volumes based in the US with many exports from Europe. Conflicts in Egypt, Libya and Syria have brought uncertainty of Oil industry performance in the world market. Siemens havin invested in electronics and high technology faces a number of challenges in business alternatives regarding technology. Siemens is currently a ‘green infrastructural giant’ although it is facing numerous challenges in fulfilling the rising customer needs in ways that are sustainable, costefficient and compatible environmentally. Legal dynamics affects companys costs such as in development of procedures and new systems. Demand is also affected if the customers likelihood to use the services or buy goods. Siemens has an opportunity to undertake capital investment in the wind and hydro sector since they are more reliable and complies with the current thinking on renewable and green energy. Wind energy has great technological complexities hence few competitors are attracted. There are a few rivals to Siemens like Enercon and Vestas which are also competitors to General Electric. Siemens has made investments in solar Energy returns are dismal in this industry. It is mature with many competitors who have heavily in sophisticated solar plants. The company will be heavily dependent on third parties hence becoming vulnerable to manipulation. Table of Contents Executive Summary 2 Introduction 4 PESTEL Analysis 5 Political factors 5 Economic factors 6 Social factors 7 Technological factors 8 Environmental factors 9 Legal factors 10 Positioning Siemens in the Global renewable energy market 11 Investment Options 11 Partnership and leadership 12 Competition in the energy sector 13 The future of renewable energy or alternative energies 14 Parnerships in provision of alternative energy 15 Strategic alliances and mergers 16 Conclusion 16 Strategic Management of Siemens Introduction Siemens was started in 1847 by Halske & Bauanstalt von Siemens specializing in power systems, lighting, radio and motion pictures. The company currently develops various electrical engineering applications, coal power plants, hydroelectric plants, nuclear reactors, and alternative energies (Gatgens, 2011). Siemens is undoubtedly the leader in the energy resource. In 2008, it consolidated and specialized in energy, health care and industry. Based on this understanding, Siemens has the necessary capital and human resources to diversify and provide green energy which is the in-thing in the current climate change discourse (Federal Ministry of Economics and Technology, 2013). With a solid financial base it can invest in systems that can expand its market share. The company has experienced immense growth due to acquisitions and expansion through its 150 years of existence (Arthur 2009). The major exploits have been electricpower systems from coal, hydro, nuclear reactors, wind and lately on alternative power such as photovoltaic cells. Success of Siemens has been enormous owing to an effective corporate structure and leadership. Great managerial decisions have seen the company consolidate much of its operations to industry, healthcare and energy with further sub sectors. The industry involves automation, drive and building technologies. Energy sub sector involves exploits on power distribution, transmission, service, generation, renewable energy, oil and gas (Davenport & Probst 2002). In the health sub sector, the company has invested in diagnostics, imaging and IT, workflow and solutions. The company and its subsidiaries have a workforce of over 420, 000 people in more than 190 countries (Rothaermel 2013). The company listed in Franfurt Stock Exchange had 76billion euros global revenue for the year 2009. PESTEL Analysis Political factors Siemens group is a subject of legislation in the German Bundestag concerning the software patents. The lead parties like CDU, FDP, and CSU are going in for a draft resolution to pass this legislation. Software patents are about to be abolished in Germany is controlled by both German and European Union laws (Federal Ministry of Economics and Technology, 2013). Software patents help Siemens to restrict competition from small companies. This can be good for Siemens but disastrous to economy and society. Siemens is also having a tough year 2013 where the chief executive Peter Loischer is set to be replaced but maintains that the chairman must also quit (Sueddeutsche Zietung 2013). In March 2011, the German government approved energy package and all laws regarding energy implementation. Siemens later in the year announced discontinuation of nuclear operations in Japan (Gatgens, 2011). The federal government of Germany the same year through Bundesrat and Bundestag approved reforms on authorization and planning procedures linked to grid construction. Being a multinational company, Siemens must comply with various fiscal policies varied in a number of countries. Global sale of products faces import and export challenges like payment of duty and tariffs at ports and airports before clearance. There has been growing debate about reducing dependency on fossil fuels which has forced Siemens to enhance its Research and Development programs to include other forms of ‘green energy’. Government stability and likely changes especially in the Middle East may likely affect the operations of Siemens. Its initial investment in energy systems may not pay back well in nations experiencing civil unrests (Gatgens, 2011). Countries in the past like China limited the role of press and prohibited the entry of some multinationals that they felt carried political tags of capitalism. The Davos conference and Kyoto meeting could easily sway the odds of the company which has capital investments in nuclear energy. Besides, Siemens which has long history in European operations may have to comply with many dicrimination and employment laws created by many third world nations. Some countries like China have no strict copyright, intellectual propertylaws and patent rights (Witcher & Chau 2010). It will be difficult to litigate against copying and unauthorized access to Siemens intellectual properties. It must also comply with various Health and Safety laws and host country laws regulating enviroonmental pollution. Extraction of fossil fuels is destructive to the environment. Economic factors Erection of overhead lines for new routes in German town and municipalities is set to have a compensation claim of 40, 000 euros per km of extra-high voltage which will be costly forSiemens to fathom. Since the company has great business volumes based in the US with many exports from Europe (Gatgens, 2011). Conflicts in Egypt, Libya and Syria have brought uncertainty of Oil industry performance in the world market. Instability in these nations likely affects the trading in barrels of oil in the world market. Besides, the global recession of 2008/09 decreased Siemens capital expenditures from consumers. Investment sentiments are currently stabilizing after some brief stint of failure in the critical industry segments and regional US, Asia, Europe and South American markets (Gatgens 2011). After the recession in 2008/09 the company has gained in 2011 and 2012 which has also boosted its investment the German headquarters. Inflation rates have also reduced since 2010. The company revenue and profits hit 8billion euros in 2011 gaining a lot after global recession (Gatgens, 2011). Siemens also experienced major layoffs in employment by more than 4% which developed a savings of 1.2 billion. These changes are anticipated to restore investor confidence from new orders of more than 15billion euros in over four years (Hitt, Ireland & Hoskisson 2011). Social factors Many people are currently migrating to urban areas to search for better life, education and jobs. Siemens will benefit from these dynamics in social trends and influence on the demand on company’s products and urbanization. These obvious trends impact on willingness, availability of individuals to work. Population growth exerts greater demand for energy which is influenced by urbanization (Gatgens 2011). This will be good for Siemens as the growing population will demand electricity. Many potential consumers in the third world are now educated, discerning and informed with greater emphasis on value for money. Siemens is now designing breakthrough products which are customer inspired solutions. There is also a rising preference on energy efficient vehicles with are characterized by low running costs. Siemens has a corporate social responsibility by being a strong member in the World energy Council under the national committee. It also has major stakes in the Association of Innovations, Advanced Research and Entrepreurship (Phadtare 2010). The continued participation in ‘çaring hands’the company has summed up many projects, programs and initiatives installed for strengthening social activities across the globe. Siemens fundamentally supports a number of humane projects and charity activities across the globe. Technological factors Siemens is leading the way to smart control of electricity demand, supply and effficiency is to install smart meters and grids. This will make it easier for the company to integrate and expand renewable energy. In 2013, Siemens will have to spend more on local distribution grids and not merely electricity transport (Federal Ministry of Economics and Technology, 2013). New gas and coal fired stations has made a lot in the acceptance of power stations critical to safeguarding future supply. Technology lowers costs, leads to innovation and improves on quality. These benefits the organizations and consumers providing this range of products. Siemens havin invested in electronics and high technology faces a number of challenges in business alternatives regarding technology. Sample technologies for Siemens innovative energies are securing a storage system, high efficiency solutions, successful learning, aiding the market penetration of fuel cells and creation of fuel efficient cities. The benefits faced are more likely to contribute to commodization, increased profit margins, increase of take-market cycle and simplifies the manufacturing process. Today, Siemens is a highly forward thinking company which has developed Global Innovation Networks that allowed them to consistently improved processes and products. They have been able to flourish their innovation through organization of their value chain (Gatgens 2011). The networks have empowered the firm to fulfil various business imperatives such as compressing the time market, increasing innovation yield, optimizing resources, maximizing global advantages and satisfying regulatory and business requirements for healthy competition among its competitors. Characterized by a sophisticated market, the company will experience competition and opportunity welded together. Growing in a global demanding market requires the implementation of a successful Product Lifecycle Management. The objectives will involve generating profitable new ideas that wades off competition while increasing market share and revenue. Environmental factors These issues include climatic and weather changes. Global warming is inevitable due to the ever changing climate hence a strong desire to undertake environmental proctection. Environmental changes pose grave concerns to many industries which as a result have moved towards environmentally friendly processes and products. In the light of this statement, Siemens is currently a ‘green infrastructural giant’ although it is facing numerous challenges in fulfilling the rising customer needs in ways that are sustainable, costefficient and compatible environmentally. Customer demand in energy has been increasing with expected reduction in electrification costs and energy consumption (Gatgens 2011). The solutions provided by Siemens are; to convert all German traffic lights into LED technology which in the process will save up to 1.4 billion kWh/year. This will result in estimated savings of 170 million euros annually. Repair services using propane gas is no longer needed. Siemens is a trend setter and it has proved that through innovation of first global tram using energy storage systems and not overhead power lines. Also important is customer demands as a result of Mobility. This has enabled attainment of high potential efficiency and lower emissions. The probable solutions have been to invest in Sea going traffic which has provided great opportunities for energy innovation and consumption (Hill & Jones 2012). Much of diesel consumption has been cut by 10% since Siemens started making electric booster drives for ships. The ultimate involves using generators that harnesses waste heat arising from fuel exhaust hence providing extra electricpower. Solutions and products allow Siemens customers to grow more eco-friendly, competitive and efficient methods. The company is way ahead in environmental portfolio investment. Approximately 6 billion euros has been allocated for green infrastructure in over 15 billion orders anticipated. There is an intensive research into electro mobility subject. An electric car manufactured using recycled materials can be a mobile energy storage device and a means of transport at the same time. Legal factors Fixed feed-in tariff within the Renewable Energy Sources Act influences the market premiums of Siemens since it affects the extra revenue from demand responsive feed-in. These are issues related to legal environments operated by companies. Legal dynamics affects companys costs such as in development of procedures and new systems. Demand is also affected if the customers likelihood to use the services or buy goods. These issues comprise the labor legislations and foreign trade reggulations. The power sector is left to bear the burden of lowering the intensity of green house gases. Together with Greenpeace, Siemens IT solutions industry is driving for major changes in environmental laws that better reflect management complexities and electronic waste handling in countries they operate. To achive various legal successes, the company have implemented the Impact 360 Worforce Management which has made it to realize a huge return on investment. It has also registered as a member of the United Nations Global Impact (Fronz 2011). It has prevailed on suppliers to obey the basic employment rights constituted by the international labour organization. It also aligns its policies and practices along the regulatory framework which is under the department of Highways, Road transport and Shipping. Siemens PLM which entails the publicly traded securities is a topicof securities laws in various countries. These are laws that govern the use and dissemination of information regarding the Siemens PLM software. Severe criminal charges and civil penalties will be meted on countries that have violated the securities laws. Positioning Siemens in the Global renewable energy market Investment Options Siemens has an opportunity to undertake capital investment in the wind and hydro sector since they are more reliable and complies with the current thinking on renewable and green energy. This can be an enormous investment requiring greater allocation of capital and human resources. It will not be financially viable for Siemens to diversify into various sources hence losing on specialty and innovation in wind energy. Some competitors like General electric have specialized in R&D and has home advantage of being a US grown company. The realization of low carbeon energy generation by 2050 is only possible through investment in a single type of renewable energy that is less risky and economically viable. Capital expenses are needed for distribution and power storage while the correction mechnisms are not up to date. Investment in ‘smart grids’ is great since it is self correcting and regulating hence providing a huge boost to alternative energies. Siemens may have to contribute over $250 million to support Silver Spring networks and Gridpoints (Jeffs 2008). Hydro and wind account for 4% and 1% in the Global energy product. Investing in wind energy is actually investing in a festest-growing alternative energy. This should be the strongest alternative taken by Siemens to build both On and Off-shore turbines. The company has immensely succeeded in installing wind turbine power to include various functions like installtion, manufacturing, wind turbine development, R&D and maintenance (Thompson &Martin 2010). The company has also made huge returns going for 19billion in 2008 alone. This will boost the revenue of the company further to 20billion by 2011. The emergence of the 3.6-megawatt wind turbine harnesses offshore power generation partly through acquisition. Partnership and leadership Collaborating in Wind energy development is the way out for Siemens. For instance, partenering with StatoilHydro of Norway enabled Siemens to develop the first ever in the Coast of Norway a floating wind turbine. Together, Siemens collaborations with other companies in host countries help in technological feasibility, greater acceptance of the project and fulfilment of legal requirements by many countries. Wind power is though durable presents challenges of reparing and maintaining sea equipment against aggressive environmental conditions. Europe is the base of Siemens in the wind energy sector (Hill & Jones 2012). Installation is a challenge due to robustness of turbine blades requiring installtion of production facilities overseas. Wind energy has now been accepted in the US after a successful installation in Iowa and production ffacility in China. It is touted that wind power can provide most of China’s energy needs. Competition in the energy sector Wind energy has great technological complexities hence few competitors are attracted. There are a few rivals to Siemens like Enercon and Vestas which are also competitors to General Electric. The contracts of windpower are lucrative once installed and only need periodic maintenance. Customer demand in energy has been increasing with expected reduction in electrification costs and energy consumption (Davenport, Leibold & Voelpel 2007). The solutions provided by Siemens are; to convert all German traffic lights into LED technology which in the process will save up to 1.4 billion kWh/year. This will result in estimated savings of 170 million euros annually. Repair services using propane gas is no longer needed. Siemens is a trend setter and it has proved that through innovation of first global tram using energy storage systems and not overhead power lines. Also important is customer demands as a result of Mobility. This has enabled attainment of high potential efficiency and lower emissions. Wolgang Dehen can safely bet for wind energy which is highly stable and durable. The company cannot lose badly if it bets on this renewable energy as it takes a leading position in renewable energy sub sector. Even the Japanese Mitsubishi energy industries will face a difficulty in hitting the wind energy sub-sector. The company can comfortably leverage its assets on wind energy hence keeping competitors at bay (Sadler 2003). The management structure though curtailed by the bribery scandal is able to harness the wave of capturing a leading role in wind energy economy. The strategic planning team is best placed to rely on wind based technologies. Siemens operates a one-stop shop giving its customers with broad wind energy solutions. The company is internally sufficient with the necessary capital and human resources hence do not need external service contracts or third party components. Siemens is strong and growing in the wind sector market share thus becoming a global leader in offshore wind turbine supply (Hill & Jones 2012). The company should optimize on competency, size and modern technology to enhance its wind energy global foot print and market share. In the near future, wind turbine demand is unlikely to fall. It is probable that wind energy is more likely to be a leading alternative energy and sufficient to generate good profit to keep the company afloat. Investing in Chinese wind energy will bring about these expectations to fruition. The future of renewable energy or alternative energies Solar power is minimal in global energy output. Though Siemens has made investments in solar energy, returns are dismal in this industry. It is mature with many competitors who have heavily in sophisticated solar plants. The company will be heavily dependent on third parties hence becoming vulnerable to manipulation. Being a multinational company, Siemens must comply with various fiscal policies varied in a number of countries. Global sale of products faces import and export challenges like payment of duty and tariffs at ports and airports before clearance. There has been growing debate about reducing dependency on fossil fuels which has forced Siemens to enhance its Research and Development programs to include other forms of ‘green energy’. Parnerships in provision of alternative energy Operations of Siemens are strengthened through partnerships with small companies in host countries. Going alone will be risky considering the legal bootlenecks of entry and having to conduct feasibility studies which is an additional cost. Siemens should partner with a local company if it is to retain its market dominance. The company can increase its stakes in hydro power through 50% asset investment. German legislation on hydro is not as severe when compared to that of nuclear power. There are great concerns over waste byproducts, environmetal terrorism, and risk of accidents posed by nuclear technology. Since Siemens has rich history in hydropower and since it is strength can leverage on new dams to boost hydro power. Siemens reputation is largely built on green energy which has lower environmental damage. Other forms of energy are worth investing in but divert a substantial amount of capital resources that can stregthen generation of hydro and wind power. Smaller power generation mechanism that have not been discovered may not yield the much need power to support the bursting global population. Based on Hydro and wind energy, Siemens strategic leaders can chose to enter the unexploited wind energy while partnering with like minded companies in host countries. Since it has the required technology in the wind and hydro sector it should become the first mover to wind the renewable energy market. Moving later may render the company as a late comer and may even have to copy from the ‘early bird’ which becomes an issue to legal redress (Amason, 2010). Strategic alliances and mergers The stakes will be high if the company is monitors market trends and stays on the look out for smaller companies as its mode of operation. These companies may have innovative technologies in strong market segments. Siemens should acquire target companies and integrate it to its portfolio since it is determined to harness this sustainable business opportunity. The investment will indeed pay off in the long-term even though prior gains may not be made under the name of Siemens. Siemens should not build and channels any of its resources in diverse and uncertain technologies but should instead invest in R&D budget of ongoing and recently acquired innovations. By taking a first mover advantage, Siemens capitalizes on a new disruptive technology and sets a base for others to follow. It should invest more in primary R&D to avoid a permanent disadvantage in alternative energies. Conclusion Siemens is driving for major changes in political, economic, social, technological, environmental and legal environment as it seeks to better reflect its management complexities in increasing its market share. To achive various legal successes, the company have implemented measures to realize a huge return on investment. It has also registered as a member of the United Nations Global Impact. It has prevailed on suppliers to obey the basic employment rights constituted by the international labour organization. Success in renewable energy will come to fruition if world leaders agree to adress issues affecting growth of sustainable energy sources. There is the obvious case of renewable energy and climate change which are big issues on a global level. Siemens cannot go alone in addressing these issues but can partner with willing nations and multinationals. It should recognize those partners who can share returns and risks while providing optimal solutions. 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