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A strategic analysis of Siemens' challenges of the near future

Project Report 2018 17 Pages

Business economics - Operations Research

Excerpt

Table of Contents

1 Introduction

2 A Strategie analysis of Siemens Group
2.1 PEST analysis
2.2 TOWS analysis
2.3 Adapted modes of entry model by Porter

3 Critical evaluation of consultant types
3.1 Why choose an internal consultant
3.2 Why choose an external consultant

4. Recommendations
4.1 Hacking and Cyber security
4.2 Europe's politics and Siemens
4.3 A new Joint Venture - Siemens and Alstom

BIBLIOGRAPHY

1 Introduction

This report will be identifying potentials for Siemens AG to enhance their business performance. To do so, the company's current state will be analysed using a PEST analysis to find challenges in the environment of the company, a SWOT evaluation and an adapted version of Porter's modes of entry for international markets. Following the analysis, the advantages and disadvantages of internal and external consultants will be discussed using current and past literature, to then be able to give recommendations on the use of consultants to solve the challenges previously discovered.

2 A Strategic analysis of Siemens Group

The following analysis of Siemens will focus on industrial digitisation, Europe's governments and joint ventures in which Siemens joined in recently to achieve and strengthen market leadership.

2.1 PEST analysis

Thompson et al.1 and Lynch2 suggest that a PEST analysis is a sufficient tool to categorise external forces that influence the company already or can have a potential impact on the way it operates (Political, Economical, Social, Technological). Due to the trend towards smart factories and the Internet of Things (I0T) this section will focus on the Technological aspect of the framework.3

While automation and digitisation are a big part of Siemens' business today, this segment will keep on growing over the next years, as Reuters suggest in their analyst report.4 With a budget of 1bn€ for research and development, the company is on a good track to keep boosting their business in this sector.5 However, automation and digitisation do not come without new challenges. These challenges are identified by Michael Krausz6 and Ustundag and Cevikcan7 and have to do with cyber security breaches. Creating networks within factories and making them “smarter”, brings many advantages such as, lower running costs, higher efficiency, possibility of quick changes to the products etc.8 These factors stand on the bright side of the smart factories.

The reason this section is focused on technology, however, is because of the challenges and threats that Siemens faces and will face in the future. These are imposed by hacking attacks and cyber security breaches that come hand in hand with projects that automate work.9 Those could be hacks that expose data in cases such as Yahoo or ebay or hackers taking control over the site, comparable to a case in Germany from 2014, when a steel mill was infiltrated and shut down from a distant.10

The impacts hacks can have on Siemens as a company are on several levels. First the relationship between the company and existing customers could suffer as well as a decline in new customers that do not want to take a risk. A more obvious way that could happen would be, if production sites got attacked and the damage that would be caused, similar to the steel mill case.

2.2 TOWS analysis

After analysing part of the external environment the company acts in, the SWOT (TOWS) analysis will help to analyse the company on an internal level.11 Even though the SWOT analysis has been criticised by many academics it is still an effective tool to quickly assess a companies major strengths and weaknesses.12 Because the quick and effective analysis is needed in this report, the SWOT was conducted and one major weakness has been found which not only concerns Siemens, but all of the European companies.

Aisen and Veiga's13 empirical study assesses the dramatic impact of political instability on the GDP of countries. With the GDP stagnating or even falling, companies in those regions tend to lose business.14 With Germany's decline in exports15, the Catalonian independence movement16 and BREXIT glooming over Europe the future has the potential of being challenging for companies who conduct the majority of their business in Europe, such as Siemens.17

The SWOT analysis, combined with the numbers of employees and revenue in Europe uncovered that Siemens is vulnerable, to an extent, by what is happening in the different governments that are under pressure at the moment.18 With a lower number of exports out of Germany in 201619, Siemens' numbers suffered due to the lower demand from the US and China. With one of their main operations being situated in Spain, leading the wind energy sector (the joint venture Siemens­Gamesa), the instability in the region can cause demand to switch to competition, because of the lack of security and predictability.20 The topic of Brexit is influencing
all major businesses in the EU and Europe and the uncertainty around the outcome is causing trouble in the management levels of leading European companies.

2.3 Adapted modes of entry model by Porter

This next section is concerned with; arguably, the biggest change that has been going on with Siemens over the past years and that has shaken the railway and wind energy industry. To analyse what is happening, an adapted version of Porter's model of market entry will be used to suit Siemens' situation.20 21 While the standard model is focused on market entry, Siemens used part of the strategy to strengthen their position in the market and to be a stronger competitor to foreign companies.22 Siemens chose to strengthen their position, by joining forces with compatible businesses in Europe. Here two mergers will be discussed: 1) Siemens Wind and Gamesa and 2) Siemens Railway and Alstom railway.

Abbildung in dieser Leseprobe nicht enthalten

In 2016 Siemens released a press statement concerning the topic of merging business with a competitor. The talks between Siemens and Gamesa started off after GE's purchase of the Alstom energy business and the merging of the German company Nordex and the Spanish Acciona Wind Power.23 This has strengthened business numbers and put the combined market share to about 14%.24 While market share is up following the merger, things are not running as smooth as they should. In October 2017 one of the main shareholders demanded a change in management when problems started to mount. The cultural clash of the two countries has been in the center of these issues with chains of command and a more rigid, rather than agile, approach to decision making. Share price has fallen by 44% since the merger in summer last year.25

With the new merger on the way to combine Siemens' railway business with its competitor Alstom, the danger of clashing cultures is there once again. With a good example of how not to do it and the challenges know that will be coming up, there will be a suggestion on how to handle this merger in section 4 of this report.26

[...]


1 Thompson, John, Jonathan M Scott, and Frank Martin, strategic Management, 8th edn (Andover: Cengage Learning EMEA, 2017).

2 Lynch, Richard, strategic Management 7Th Edn, 7th edn (Harlow: Pearson Education Limited, 2015), pp. 260-304.

3 Siemens AG, Annual Report, Annual Reports (Munich: Siemens AG, 2016) <https://www.siemens.com/investor/pool/en/investor_relations/Siemens_AR2016.pdf> [accessed 26 November 2017].

4 Reuters, Exclusive: Iberdrola Demanded Change At Siemens Gamesa As Problems Mounted" (Reuters, 2017), pp. 1-14 <https://www.reuters.com/article/us- siemensgamesa-management-exclusive/exclusive-iberdrola-demanded-change-at- siemens-gamesa-as-problems-mounted-idUSKBN1CP1TO> [accessed 24 November 2017].

5 Siemens AG, ™Annual Report, Annual Reports (Munich: Siemens AG, 2016) <https://www.siemens.com/investor/pool/en/investor_relations/Siemens_AR2016.pdf> [accessed 26 November 2017].

6 Krausz, Michael, Managing Information Security Breaches, 2nd edn (It Governance Publishing, 2015).

7 Ustundag, Alp, and Emre Cevikcan, Industry 4.0, 1st edn (Cham: Springer, 2017), pp. 267- 284T

8 Wang, Shiyong, Jiafu Wan, Di Li, and Chunhua Zhang, "Implementing Smart Factory Of Industrie 4.0: An Outlook", International Journal Of Distributed Sensor Networks, 12 (2016), 3159805 <https://doi.orq/10.1155/2016/3159805>.

9 Krausz, Michael, Managing Information Security Breaches, 2nd edn (It Governance Publishing, 2015).

10 Armerding, Taylor, "The 16 Biggest Data Breaches Of The 21st Century", cso Online, 2017 <https://www.csoonline.com/article/2130877/data-breach/the-16-biggest-data- breaches-of-the-21st-century.html> [accessed 22 November 2017].; "Hack Causes 'Damage' At steel Works", BBC News, 2014 <http://www.bbc.co.uk/news/technology- 30575104> [accessed 26 November 2017].

11 Lynch, Richard, strategic Management 7Th Edn, 7th edn (Harlow: Pearson Education Limited, 2015), pp. 260-304T

12 Bell, Geoffrey G., and Linda Rochford, "Rediscovering SWOT’S Integrative Nature: A New Understanding Of An Old Framework", The International Journal Of Management Education, 14 (2016), 310-326 <https://doi.org/10.1016/Uime.2016.06.003>.: Van Deusen, Cheryl A, Williamson Steven A., and Harold c Babson, Business Policy And Strategy, 7th edn (Boca Raton, FL: Auerbach Publications, 2007).

13 Aisen, Ari, and Francisco José Veiga, "How Does Political Instability Affect Economic Growth?", European Journal Of Political Economy, 29 (2013), 151-167 <https://doi.Org/10.1016/i.ejpoleco.2012.11 ■001>.

14 Gillespie, Andrew, Foundations Of Economics, 4th edn (Oxford: Oxford University Press, 2016), pp. 480-508.

15 Friedman, Greg, and John Shapiro, "3 Issues That Will Lead To Trouble In Europe In 2017", Business Insider, 2017 <http://www.businessinsider.com/these-are-the-3-main- issues-for-europe-in-2017-2017-1 ?IR=T> [accessed 24 November 2017].

16 "Catalonia Crisis: What Next For Spain?", BBC News, 2017 <http://www.bbc.co.uk/news/world-europe-41551466> [accessed 26 November 2017].

17 Dhingra, Sara, George Ottaviano, Thomas Sampson, and Jan Van Reenen, The Impact Of Brexit On Foreign Investment In The UK (kenwitconsulting, 2017) <http://www.kenwitsconsultancy.co.uk/wp-content/uploads/2016/09/BREXIT-2016- Policy-Analysis-from-the-Centre-for-Economic-Performance.pdf#page=40> [accessed 26 November 2017].

18 Siemens AG, жAnnual Report, Annual Reports (Munich: Siemens AG, 2016) <https://www.siemens.com/investor/pool/en/investor_relations/Siemens_AR2016.pdf> [accessed 26 November 2017].

19 Friedman, Greg, and John Shapiro, "3 Issues That Will Lead To Trouble In Europe In 2017", Business Insider, 2017 <http://www.businessinsider.com/these-are-the-3-main- issues-for-europe-in-2017-2017-1 ?IR=T> [accessed 24 November 2017].

20 Siemens AG, ™Annual Report, Annual Reports (Munich: Siemens AG, 2016) <https://www.siemens.com/investor/pool/en/investor_relations/Siemens_AR2016.pdf> [accessed 26 November 2017].

21 Lynch, Richard, strategic Management 7Th Edn, 7th edn (Harlow: Pearson Education Limited, 2015), ppľ260-304T; Thompson, John, Jonathan M Scott, and Frank Martin, Strategic Management, 8th edn (Andover: Cengage Learning EMEA, 2017).

22 Siemens AG, ™Annual Report, Annual Reports (Munich: Siemens AG, 2016)

<https://www.siemens.com/investor/pool/en/investor_relations/Siemens_AR2016.pdf> [accessed 26 November 2017].

23 "Siemens And Gamesa To Merge Wind Businesses", Ft.Com, 2017 <https://www.ft.com/content/01551 aec-34ae-11 e6-bda0-04585c31 Ы53> [accessed 26 November 2017].

24 Siemens Gamesa, Siemens And Gamesa To Merge Wind Businesses To Create A Leading Wind Power Player, 2017.

25 Reuters, Exclusive: Iberdrola Demanded Change At Siemens Gamesa As Problems Mounted" (Reuters, 2017), pp. 1-14 <https://www.reuters.com/article/us- siemensgamesa-management-exclusive/exclusive-iberdrola-demanded-change-at- siemens-gamesa-as-problems-mounted-idUSKBN1CP1TO> [accessed 24 November

26 2017!' Kaeser, Joe, and Ralf p. Thomas, "Creating A European Champion In Mobility To Better Serve Our Customers Worldwide", 2017

Details

Pages
17
Year
2018
ISBN (eBook)
9783668665484
ISBN (Book)
9783668665491
File size
638 KB
Language
English
Catalog Number
v417204
Institution / College
Queen Mary University of London
Grade
70
Tags
Consultancy Analysis of Siemens Siemens AG AG Siemens Report Strategy Strategy Analysis Consulting

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Title: A strategic analysis of Siemens' challenges of the near future