Siemens Wind Energy - Coursework Example

Marketing Planning: Siemens Wind Energy inserts his/her Siemens Part INTRODUCTION Siemens’ vision with respect to offshore wind power is to continue to gain a pioneering position in this field and capture this market. In the medium term, however, the company aims to achieve double-digit growth in the market which it deems as ‘realistic’. The company’s Vision 2020, in particular, does not include onshore wind generation, thereby reflecting a focus on ‘offshore wind’. The company’s mission in this regard, however, is to continue to thrive on wind power as a key constituent of its renewable energy generation. As stated by the company, Siemens continues to be a leading entity in the field of wind power generation since 30 years (Uldrich, 2008). The strategic business units for Siemens Renewable Energy division comprise of Wind Power, Solar Power, Hydro Power, Biomass Power and Distributed and Hybrid Energy (Siemens, 2015). Part 2: SWOT Intense competition amongst big three firms in global wind market with global market share differential of only 0.7% between Siemens and its close competitor- Vestas (Zawadzki, 2015). One of the fundamental issues facing Siemens Wind Energy is the inability to set foot in the Chinese market which happens to be one of the fastest growing markets for wind energy. This is owing to stiff competition from rivals such as Ming Yang , Goldwind and United Power which continue to dominate top positions in their home country (Gosensa & Lu, 2014) . Previously, European solar power manufacturers have been virtually eliminated by cheaper Chinese competititors. In conjunction to this is the threat of overinvestment which has left many, including the Danish Vestas, on the verge of bankruptcy (Lund, 2014). Another major issue confronting Siemens is the cost of electricity generation from offshore turbines which, at 14 euro cents a kilowatt-hour, is still higher than the cost of fossil-fuel electricity generation in Europe (The Economist, 2014). Unless binding targets of renewable energy consumption are set by EU towards its member states, Siemens may expect falling demand for offshore wind turbines in European countries. This is reflected in the fact that the Europe and Middle East market, which is currently the largest global market for wind energy, is expected to contract to 34% down from 40% by 2030 (Reuters, 2013). Next, the company is facing the brunt of vague political efforts and direction in the field of renewable energy. Planned projects have consequently been delayed as main offshore wind markets such as Germany suffer from policy restructuring, thereby reducing the targeted capacity for offshore wind energy (Schaps, 2014). Finally, a major issue lies in the faulty manufacturing process of bearings used in wind turbines from a particular supplier for Siemens. Early degradation of these bearings have resulted in costs of over EUR 223 million for inspection and replacement of bearings used in turbines onshore as well as restoration of both onshore and offshore turbines (Prodhan & Hack, 2014). In an attempt to counter this, the company has entered into discussions with the concerned suppliers in addition to the implementation of certain changes in design for protection of turbine blades. Part 3: COMPETITOR ANALYSIS Amongst the two main competitors of Siemens are Vestas and General Electric Co. (GE) As per the BCG matrix, adaptive advantage is supplemented by signal, systems, social, simulation and people advantage (Reeves, et al., 2012). Siemens has adaptive advantage in the form of systems advantage. It has countered the problem of blade erosion by introducing polyutherane coating on all offshore blades (Higgins & Foley, 2014), thereby extending product lifecycle of its ‘cashcow’ products- the wind turbines. For Siemens, innovation has always been on the forefront. The company recently installed a new wind turbine in the US which has the highest capacity factor in the industry (Siemens, 2015). Vestas, on the other hand, significantly relies on cost-cutting as its source of competitive advantage. It has reduced the levelled cost of energy on the basis of technological enhancements to the 2MV and 3MV wind turbine platforms that lower the cost of components (Vestas, 2013). The company has also made R&D investments in for further improvement in existing products, thereby engaging in lifecycle extension. The company still relies on the 20-year old 2MV platform for wind turbines (which happens to be ‘cashcow’ in the product portfolio). However, development of the new 8MV platform (prototype/pre-launch stage) shall prove to be revolutionary and may enable Vestas gain substantial competitive advantage over Siemens. General Electric Co. (GE), much like Vestas, follows the principle of cost reduction by using ‘multimodal’ production sites whereby analytics are used to increase the productivity of wind farms by 5% and profitability by 20% (General Electric, 2014). Part 4: ANSOFF’S MATRIX The Ansoff Matrix takes on ‘products’ and ‘markets’ as the two dimensions with which companies grow (Faarup, 2010) (Kazmi, 2008) (Appendix 1). Siemens has been adopting the strategies of Market development as well as Product Development as per Ansoff’s matrix which means it is increasing its revenue stream by targeting various geographical segments along with engaging in product innovation. The company holds a 60% share in the (offshore) European market for wind turbines, followed by 27% held by Vestas (EWEA, 2014) . In the past three months, the company has launched new wind turbines in its existing market- the U.S, taken on additional orders in the U.S with companies such as Amazon alongwith orders in Canada, Oklahoma, Egypt and South Africa (Siemens AG, 2015). The company is handling comprehensive service packages (such as contribution to the Amazon Wind Farm) in order to cater to the needs of smaller players in onshore markets owing to widespread fragmentation in these markets (Siemens AG, 2015). Increasing the market share in offshore markets has, therefore, been an instrumental part of Siemens’ marketing strategy. In order to achieve this objective, the company is engaged in tough competition from Chinese manufacturer Goldwind and Vestas in Australian markets (Silva & Klagge, 2013). Part 5: STRATEGIES & MARKETS The growth strategy for Siemens Wind Energy is Product Development. The pen portrait is given in Appendix 2. The target market profile and visual board (Appendix 3) for the target market is as follows: Product Wind turbines Geographic Segmentation Region- EWEA (European Wind Energy Association) Size of city- Large metropolitan cities Psychographic Segmentation Environmentally conscious individuals preferring clean technology Focus on low-cost energy alternatives Keeping the above in mind, Siemens must be continuously involved in new product development and bring out new products such as the 8MV platform to be introduced by its competitor. As far as price is concerned, the company must engage in cost reduction techniques in order to lower cost of production as far as possible to earn maximum profit. A major concern here has been the increasing cost of repair of bearings from particular suppliers which has resulted in net loss for the wind energy unit despite high prices. The company can certainly not offer price skimming owing to an intensely competitive market. Therefore, differentiation pricing may be a viable option. As far as promotion is concerned, the company needs to actively promote the production and use of sustainable power which will directly increase sales of its sustainable wind turbines. It will have to engage in promotional techniques such as trade shows and conferences in order to highlight its innovations and demonstrate its energy efficiency. Finally, the company needs to strengthen its supply chain by imposing greater check and balance on its suppliers which have previously provided faulty turbines. This may require partnering with suppliers and entering into backward integration to ensure the quality of turbines meets company standards. References Blackwell, B., 2014. Wind Power: The Struggle for Control of a New Global Industry. New York: Routledge. EWEA, 2014. The European offshore wind industry - key trends and statistics 2013, s.l.: EWEA. Faarup, P. K., 2010. The Marketing Framework. Denmark: Academica. General Electric, 2014. GE 2014 Annual Report, s.l.: General Electric. Gosensa, J. & Lu, Y., 2014. Prospects for global market expansion of China’s wind turbine manufacturing industry. Elsevier: Energy Policy, Volume 67, pp. 301-318. Higgins, P. & Foley, A., 2014. The evolution of offshore wind power in the United Kingdom. Elsevier Renewable and Sustainable Energy Reviews, Volume 37, pp. 599-612. Kazmi, A., 2008. Strategic Management and Business Policy. New Delhi: Mc Graw-Hill. Lund, P. P., 2014. How fast can businesses in the new energy sector grow? An analysis of critical factors\. Elsevier: Renewable Energy, Volume 66, pp. 33-40. Pedraza, J. M., 2015. Electrical Energy Generation in Europe: The Current Situation and Perspectives in the Use of renewable energy. Switzerland: Springer International Publishing. Prodhan, G. & Hack, J., 2014. Siemens sees consolidation, not growth, in 2015. [Online] Available at: http://www.reuters.com/article/2014/11/06/us-siemens-results-idUSKBN0IQ0DI20141106 [Accessed 28 May 2015]. Reeves, M., Haanaes, K., Love, C. & Levin, S., 2012. Sustainability as Adaptability. Journal of Applied Corporate Finance, 24(2), pp. 14-22. Reuters, 2013. Wind power market will more than quadruple by 2030 - Siemens. [Online] Available at: http://www.reuters.com/article/2013/08/26/siemens-wind-idUSL6N0GR0Q920130826 [Accessed 27 May 2015]. Schaps, K., 2014. Siemens grows European offshore wind market lead over Vestas. [Online] Available at: http://www.reuters.com/article/2014/01/28/europe-wind-siemens-idUSL5N0L22IY20140128 [Accessed 27 May 2015]. Siemens AG, 2015. Siemens: Press Releases. [Online] Available at: http://www.siemens.com/press/en/pressrelease/index.php?content[]=WP [Accessed 28 May 2015]. Siemens, 2015. Siemens launches new wind turbine in the U.S. with industry-leading capacity factor. [Online] Available at: http://www.siemens.com/press/en/pressrelease/index.php?content[]=WP&content_0=WP&sheet=0 [Accessed 28 May 2015]. Siemens, 2015. Siemens: Wind Power. [Online] Available at: http://www.energy.siemens.com/hq/en/renewable-energy/wind-power/ [Accessed 30 May 2015]. Silva, P. C. & Klagge, B., 2013. The Evolution of the Wind Industry and the Rise of Chinese Firms: From Industrial Policies to Global Innovation Networks. European Planning Studies: Global and Regional Dynamics in Knowledge Flows and Innovation Networks, 21(9), pp. 1341-1356. The Economist, 2014. Still short of puff. [Online] Available at: http://www.economist.com/news/business/21597920-europes-wind-turbine-makers-are-pleading-more-political-support-still-short-puff [Accessed 26 May 2015]. Uldrich, J., 2008. Green Investing: A Guide to Making Money through Environment Friendly Stocks. Mason: Adams Media. Vestas, 2013. Vestas Annual Report 2013, s.l.: Vestas. Zawadzki, S., 2015. Siemens tops global wind turbine market, Vestas slips, GE rises. [Online] Available at: http://www.reuters.com/article/2015/03/09/windpower-turbines-market-idUSL5N0WB34I20150309 [Accessed 26 May 2015]. Appendix 1 Ansoff Matrix Appendix 2 Pen Portrait Clean, Amazon Green, MidAmerican Denmark’s largest wind park, Anholt Appendix 3 Visual Board Read More