Siemens. Political, economical, socio-cultural, technological, environmental and legal analysis

TABLE OF CONTENTS

INTRODUCTION

INTERNATIONAL BUSINESS ENVIRONMENT
- POLITICAL
- ECONOMICAL
- SOCIO-CULTURAL
- TECHNOLOGICAL
- ENVIRONMENTAL
- LEGAL

THE ORGANIZATIONAL STRUCTURE OF SIEMENS

GLOBAL OR LOCAL?
- EUROPE, C.I.S. AND AFRICA:
- ASIA:
- AMERICA:

SUBSIDIARY STRATEGY
- OVERVIEW
- SIEMENS VENTURE CAPITAL
- INDUSTRY SECTOR INVESTMENTS

FUTURE TRENDS
- OVERVIEW
- PORTFOLIO STRATEGY
- CLIMATE PROTECTION
- CORPORATE CITIZENSHIP

APPENDIX

REFERENCES

INTERNET SOURCES

INTRODUCTION

Siemens is a German electronics engineering company operating in the industry, energy and healthcare sectors. Although most people associate Siemens’ brand with household appliances and other consumer products there is more to the company than meets the eye of the general public. In fact the core businesses of the company are the aforementioned business to business operation sectors. Siemens first started its operations in 1847 selling electrical telegraphs and employing 10 people. Now over 160 years later with around 430,000 employees and revenue of €77.3 billion Siemens is one of the biggest companies in the world. As a testament to this Siemens is currently occupying 30th position in Fortune magazine’s Global 500 ranking. Due to the immense size of Siemens and the complexity of its operations, the scope of this report is narrowed. Focus is set to the company’s industry sector, which is the largest and most profitable sector in the segmentation of Siemens’ businesses (see appendix, figure 2). The industry sector addresses industry customers in the fields of production, transportation, lighting and building technologies and is divided into 6 distinct divisions: industry automation, drive technologies, building technologies, OSRAM, industry solutions and mobility. With revenue of €38.1 billion the sector contributes a big chunk to the overall income of Siemens and in size would rival most companies in the world even without the parent company and other sectors.

INTERNATIONAL BUSINESS ENVIRONMENT

- POLITICAL

The Siemens headquarters are located in Berlin and Munich, Germany. After two lost world wars Germany has become a stable and democratic country which has just voted a Christian - Liberal parliament. This result will not change the political situation dramatically. Regarding the employment market the new Christian - Liberal coalition will not introduce a minimum wage, like a social - democratic led coalition would have done, and as an advantage for bigger companies, like Siemens, it will loosen dismissal protection regulations. This means that Siemens may have to pay lower wages for his low educated labour. But over all Germany’s personnel costs are on a high level because of the broad social system and the pension scheme.

In the recent years Siemens was involved in a corruption scandal which shocked the entire company. As a consequence the chairman of management board Klaus Kleinfeld and the chairman of the supervisory board Heinrich von Pierer had to abdicate. The expected costs as well as the ones already paid will be around 2.9 billion Euros.¹ Siemens offered, after this unexampled scandal came out, full cooperation and created an own department to solve the whole misery.

As a result Germany lost places in the Transparency International report and is now ranked 14th².

- ECONOMICAL

Like in a lot of other countries Germany also faces problems caused by the financial meltdown. Therefore the economic growth rate declined from 3.2 % in 2006 to 1.3% in 2008 and will lead to -5.4% in 2009. Recovery in the positive zone is estimated in 2010 (0.3%). The Eurozone (16) acts similar with a rate from 2.9% in 2006 to 0.8% in 2008 and -4.0% in 2009³. A recession benefited deflation is not predicted (GER: 2.6% in 2008 and 0.3% in 2009; Eurozone (16): 3.3% in 2008 and 0.4% in 2009)⁴. Finance crisis started in the USA and that’s why the USD loses value from 1.17 USD/EUR in 2006 to 1.46 USD/EUR in Sept. 2009. The EURO is still a stable currency with strong purchasing power.

40 Million People are employable in Germany which leads to an Employment per capita of 70.7% in comparison to 66.1% in the Eurozone (16).⁵

Negative aspects are the expensive labour costs. In 2009 a working hour costs €27.80 in comparison to €26 in the EU and €27.87 in Finland.⁶

Germany’s economy’s long-term prospects should begin with balancing the federal budget, creating a stable framework for ensuring the continued liquidity and solvency of the financial system. The banking sector needs to be supervised so that credits flow again to consumers and companies.⁷

The car industry, which suffered hard under the financial crisis, is Germany’s major employer and Siemens’ industry sector is involved with it via several divisions. If the automobile industry recovers, there will be a boost for Siemens.

- SOCIO-CULTURAL

“International businesspeople, who face the chance of managing and motivating employees with different cultural backgrounds, need to understand what these personality traits and need structures are and how they differ across cultures.”⁸ And the structure of Germany will change. The median age of 43.8 years will rise in the future because 66.1% of the Germans are 15-64 years old and when they retire there will not be enough young people who will be able to support their health services. That is why Germany’s population growth rate is negative (-0.05; 212th place in the world).⁹

This previous aspect is one reason why Germany’s government encouraged immigration over the recent decades. 10% of children that were born in Germany have a migration background but the overall migration rate is only 0.0219. People with a migration background have a higher birth rate but the majority also have a lack of education. It is extremely important to integrate these people in order to make them a useful part of Germany’s future society. The future demands on Germany’s employees’ knowledge will change from production to service (see appendix, figure 1). Only 17% of German students are studying mechanical or industrial engineering, decreasing tendency. Most of Siemens divisions do not profit from this trend.

- TECHNOLOGICAL

Because Siemens acts in three different sectors - industry, healthcare and energy - Siemens must have high innovative potential to be able to compete with the high amount of contestants (See appendix, figure 4). But to operate in three different sectors also offers many opportunities to generate synergies in research and development. Thus Siemens sees itself as an integrated technology company.

A very important fact Siemens has to be aware of is the copying of their patents especially in Asia. But therefore they have implemented a patent strategy in their innovation strategy “Its innovation strategy incorporates elements such as technology strategy, resource optimization for research and development, shaping the innovation process, and patent and standardization strategy, whereby consistent and rigorous application holds the key to success”¹⁰.

- ENVIRONMENTAL

“Sustainability as we understand it is closely linked to our values. In all its complexity, it is our contribution to a more equitable world economy and the provision of energy-efficient, durable products and solutions for our customers.”¹¹

Siemens is conscious about the change in climate because of carbon dioxide emissions. They see the reducing of their energy consumption as an opportunity for saving costs as well. Siemens has also recognized the trend of green energy in recent years. Therefore they invented different models to save energy in buildings as well as new power plants workingwith waste wood.

[...]

¹ Daniel Schäfer (2009): ”Siemens ultimatum in bribery scandal”, In: Financial Times online edition. Requested on 25.09.2009. URL: http://www.ft.com/cms/s/0/efe67d0c-a862-11de-9242-00144feabdc0.html?nclick_check=1

² Dieter Zinnbauer, Rebecca Dobson and Krina Despota (2009): Global Corruption Report 2009. Transparency International annual reports. P. 431, table 13.

³ Wirtschaftskammern Österreich (2009): ”Economic Growth Rate” (”Wirtschaftswachstum”). [German]. Calcutations for 2009 and 2010 are estimated.

⁴ Wirtschaftskammern Österreich (2009): ”Inflation rates.”(”Inflationsraten”). [German]. Calculations for 2009 are estimated.

⁵ Eurostat (2009): „Employment level per capita.” In: Eurostat online st]atistics. Requested on 25.09.2009. URL: http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=1&language=de&pcode=tsiem010

⁶ Eurostat (2009): „Labour costs per hour.” In: Eurostat online statistics. Requested on 25.09.2009. URL: http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=0&language=de&pcode=tps00173

⁷ Monthly Report March 2009: Germany. Outlook for 2009-10. Page 3-4.

⁸ Griffin, Ricky W. and Pustay, Michael W. (1995): International business: A managerial perspective, Prentice Hall, P. 478.

⁹ Central Intelligence Agency, USA (2009): ”Germany.” In: The world factbook. Requested on 01.10.2009. URL: https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html

¹⁰ Siemens. ”The Siemens Think Tank” ”(Germany) 22.01.2009. Requested on 25.09.2009. URL: http://w1.siemens.com/innovation/en/about_fande/corp_technology/technology_office.htm

¹¹ Dr. Johannes von Karczewski, Dr. Christoph Wegener Germany (2008) „sustainability report”. Requested on 25.09.2009. URL: http://w1.siemens.com/responsibility/report/08/pool/en/sustainability_report_2008.pdf