Strategic Analysis of ThyssenKrupp Elevator. General Environment Analysis (PESTEL), Industry Environment Analysis (5-Forces), Core Competencies Analysis, and SWOT Analysis


Term Paper, 2017

27 Pages, Grade: 2

Anonymous


Excerpt

Table of Contents

List of Figures

List of Tables

List of Abbreviations

1. Introduction
1.1. History and Overview of ThyssenKrupp
1.2. Scope of Work

2. Mission and Vision of ThyssenKrupp

3. General Environment Analysis (PESTEL)
3.1. Political and Legal Segment
3.2. Economic Segment
3.3. Socio-cultural Segment
3.4. Technological Segment
3.5. Ecological Segment

4. Industry Environment Analysis (5-Forces) (Elevators and Escalators)
4.1. Intensity of Rivalry among Competitors
4.2. Threat of new Entrants
4.3. Bargaining Power of Suppliers
4.4. Bargaining Power of Buyers
4.5. Threat of Substitute Products
Internal Analysis

5. Core Competencies Analysis

6. Financial and Operating Performance

7. SWOT Analysis

8. Current Strategy

9. Recommendations

10. Outlook and Conclusion

Appendix

Bibliography
Monographs
Internet

List of Figures

Figure 1: Source: Own depiction, n. p

Figure 2: Source: Own depiction according to the annual reports of companies, (2012-2016)

Figure 3: Source: Own depiction according to ThyssenKrupp annual reports, (2010-2016)

Figure 4: Source: Own depiction according to ThyssenKrupp annual reports, (2010-2016)

Figure 5: Source: Own depiction according to ThyssenKrupp annual reports, (2010-2016)

Figure 6: Source: Own depiction according to ThyssenKrupp annual reports, (2010-2016)

Figure 7: Source: Own depiction according to ThyssenKrupp annual reports, (2010-2016)

Figure 8: Source: ThyssenKrupp Annual Report, 2016, p. 37

List of Tables

Table 1:Key Financial Figures of Competitors in the Elevator and Escalator Industry. 5

List of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

1. Introduction

1.1. History and Overview of ThyssenKrupp

ThyssenKrupp AG is a European multinational conglomerate corporation based in Duisburg and Essen in Germany. The corporation consists of 670 companies worldwide. On March 17 1999, Thyssen AG (founded 1891) and Fried Krupp AG Hoesch Krupp (founded in 1811), as two German industrial giants, merged together to form the today´s ThyssenKrupp corporate (ThyssenKrupp, 2016, History). It is one of the largest steel producers over the world and consists of five business areas: Components Technology, Elevator Technology, Industrial Solutions, Materials Services and Steel Europe and Steel Americas. The business areas are divided into business units and operating units In 78 countries. Products are ranging from machines and industrial services, to steel production as well as shipbuilding (ThyssenKrupp, 2016, Corporate Structure), in addition to activities in the sphere of defense. Dr. Heinrich Hiesinger is the Chief Executive Officer (CEO) of ThyssenKrupp since January 21, 2011 and a member of the Executive Board since October 01, 2010. He is carrying on many responsibilities such as “corporate functions communications, internal auditing, strategy, markets & development, technology, innovation & sustainability, and he is responsible for the regions Asia-Pacific and China (ThyssenKrupp annual report, 2015, p.8).

ThyssenKrupp Elevator is specialized in manufacturing elevators, escalators and moving walks and provides passenger transportation systems globally as the third largest company in the world. In order to analyse the strategy of ThyssenKrupp Elevator, we need to answer fundamental questions like who are we and what do we do?, where are we now and how did we get here?, where are we heading?, where would we like to be?, are we on the right track? And how do we get there?

1.2. Scope of Work

This paper reviews and thoroughly analyse the strategy of ThyssenKrupp Elevator as a part of ThyssenKrupp AG group by implementing a variety of tools to analyse the impact of the external and internal environment on the company. It also reviews the current strategy and provides helpful general recommendations on how the company should proceed in order to reach global growth and benefit from the industry growth.

2. Mission and Vision of ThyssenKrupp

A vision statement describes the company´s directions and future for a life span of 10 to 20 years as well as it defines the long-term goals and represents the company´s philosophy which forms the reference for the company to break down challenges and achieve these goals (Naisbitt, 2000, p. 46). A mission statement is the core of a business which articulates the strategy used to achieve the company´s goals and objectives and defines target population and Company´s values as well as it guides the planning process (Naisbitt, 2000, p. 47).

Vision of ThyssenKrupp Elevator is defined as “Engineering confidence with everything we do” for the company to build trust among customers in terms of providing reliable and convenient passenger transportation systems for better flow of urban life and to make cities better place to live (ThyssenKrupp Elevator, 2017, About us) and to deliver the best people flow experience.

ThyssenKrupp´s mission revolves around engaging customers, employees, investors, and society to reach global markets and to ensure competency and diversity, creating value for employees, customers and shareholders, providing innovative products to create sustainable infrastructure, and ,as a customer-focused company, keeping employee health and workplace safety as a top priority (ThyssenKrupp, 2017, Corporate Culture).

External Analysis

3. General Environment Analysis (PESTEL)

3.1. Political and Legal Segment

ThyssenKrupp is based in Germany, one of the largest democracies over the world, with large number of population and different cultures. In the political environment, the worldwide conflicts such as Ukraine crises, Middle East conflicts and refugee crises in the EU are one of the key political factors that influence the company as well as the interest rate policy of US (Frère, 2016, p. 19). Private ownership gives the company more independency and flexibility over the government-owned competitor company Steel Authority of Germany. While the government employs big efforts to improve the infrastructures, ThyssenKrupp benefits of the government support of the steel industry and on the other side, it has avoided becoming nationalized and expanded globally (Research Matic, 2017, ThyssenKrupp PEST Analysis).

3.2. Economic Segment

Within the context of the economic environment, the world economy has an increasing growth rate of 3.1 % in 2016 and projected to reach 3.4 % in 2017 as well as 3.6 % in 2018, especially in the developed economies (World Economic Outlook Update, 2017, p. 7). In addition to exchange rates, developments and global economic cycle, the automotive and construction industry as well as the international steel industry have big influence. But on the other side, the competition rising from China besides the worldwide decline in steel demand will almost lead to lower supply and prices (Frère, 2016, p. 20).

3.3. Socio-cultural Segment

The demographic developments and progressive globalization as well as the increasing urbanization are playing big role in characterizing the social environment of ThyssenKrupp which benefits of the increasing need for constructions and developing infrastructure so that can provide the company with more growth opportunities (Frère, 2016, p. 20).

3.4. Technological Segment

Manufacturing in ThyssenKrupp is characterized by the high-level of digitalization and Industry 4.0 to connect the real world with cyberspace and increase the resource efficiency by 30 – 40 %, as it is one of the world´s leading suppliers and designers of production lines with robots, machines, and handling equipment assembled and tested virtually in a 3D simulation with very improved software tools (ThyssenKrupp, 2017, industry 4.0).

3.5. Ecological Segment

In this framework, ThyssenKrupp has adopted developed environment protection technologies (with expenditure of € 474 million and investments of € 76 million) such as dust filters, wastewater treatment Facilities, and oil separators under legal obligations and certified environmental management systems corresponding to the international standards ISO 14001 to provide environment-friendly and energy-efficient products and services (ThyssenKrupp, 2017, Environmental protection). Moreover, big efforts are put to ensure more efficiency in avoiding waste and reusing it as raw materials for the production process.

4. Industry Environment Analysis (5-Forces) (Elevators and Escalators)

Comparing to the general environment, the industry environment affects directly the company´s strategic competitiveness. The competition and potential profit in the industry is the core function of five forces represented by the threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products and the intensity of rivalry among competitors (Hanson et al., 2011, p. 48).

Abbildung in dieser Leseprobe nicht enthalten

Figure 1: Source: Own depiction, n. p.

5-Forces Analysis

4.1. Intensity of Rivalry among Competitors

The E&E industry is becoming more competitive due to its globalizing nature. This industry of vertical transportation requires high-level engineering expertise as well as efficient production process. Based on revenues, the major 4 players in this industry are ThyssenKrupp Elevator, KONE, OTIS (Part of United Technologies of the U.S.A.) and Schindler (Rocholl, 2016, n. p.). Table 1 below shows their 2016 key financial figures.

Abbildung in dieser Leseprobe nicht enthalten

Table 1: Source: Own depiction according to annual reports of 2016 and official websites, 2017, n. p.

The table shows that the other players have achieved larger market share and generated more operating profit than ThyssenKrupp in 2016.

The global E&E market is projected to grow more and more by 2020 due to the increasing demand for smart intelligent elevators, recovering construction and continuously developing technologies. Over all, the small usable land in big and active cities besides the growing number of population and the wave of urbanization would put high pressure on cities to expand vertically where the need for modernization and safety concerns would drive market growth (Global Industry Analysts Inc., 2016, Remarkable Vertical Growth).

Since this industry makes specialized equipment, there is less price competition and players have healthy profit margins. The figure below shows the operating profit margin (EBIT %) of the 4 major players for the years 2012 – 2016.

Abbildung in dieser Leseprobe nicht enthalten

Figure 2: Source: Own depiction according to the annual reports of companies, (2012-2016), n. p.

ThyssenKrupp has achieved an increasing year-on-year EBIT margin as a result of higher sales reflecting better operating performance and efficiency (ThyssenKrupp annual report, 2016, p. 60) but it still lower than that of its competitors because they have larger maintenance segment generating much higher operating profit than new installations. Schierenbeck, chief executive of ThyssenKrupp Elevator, said the performance was better than expected and he affirmed that the operating margin would meet the target to reach 15% this year 2017 and sales would be driven up by hundreds of millions of investments (Nasdaq by Reuters, 2017, n. p.).

4.2.Threat of new Entrants

Threat of new entrants in E&E industry is low due to high capital required and higher wages for high skilled labour and experts. Customers are loyal to the existing reputable companies. On the other side, new entrant is required to enter the market by manufacturing, installing and maintaining equipment where the major players are investing in all segments as well as in all markets. Overall, new entrant has many other barriers such as finding and hiring high skilled employees, building manufacturing facilities, compliance to environment protection standards, and investing in R&D to keep up with technology.

ThyssenKrupp Elevator, KONE, OTIS and Schindler are dominating the market with total sales of $38.7 billion in 2016 (see table 1). They spread throughout the globe with hundreds of projects. They have years of experience and resources of skilled labour. They built strong relationships with suppliers and developed new digitalization systems.

ThyssenKrupp Elevator is the third largest elevator, escalator and moving walks manufacturer in the world with high engineering capabilities and innovations and it has managed sales and high-quality services in over 900 locations with customers in 150 countries and reached net sales of €7.5 billion (ThyssenKrupp Elevator, 2017, Company Overview).

4.3.Bargaining Power of Suppliers

The supply of materials and services in this industry is very important when it comes to prices, quality, leading times, and safety. Suppliers are required to constantly improve their products and production process to ensure Sustainability, efficiency, quality improvements, according to ISO 9001:2008, and cost effectiveness besides providing proof of financial stability (David Gardecki et. al., 2013, p. 8). When prices increase, the manufacturer has no choice but to pay to suppliers who provide special parts which are part of the system as a whole, and to change the design of some parts, you need to change many other parts and this is not feasible and takes long time. Overall, skilled labour shortage has impact on suppliers in terms of producing high technological parts.

4.4. Bargaining Power of Buyers

In this industry, the customer has very narrow choice of reputable companies. On the other side, the other small companies have no ability to provide elevators and/or escalators, installation, maintenance and other related services as a whole package like the major players who Customers tends to choose to get complete package. At the same time, bigger customers shows some more power in terms of quality demand, on-time installation, warranties, and environmentally friendly products as well as modernization every 20-25 years.

4.5. Threat of Substitute Products

Due to high growth in urbanization, 70 % of population will be living in cities by 2050. Therefore, buildings are getting taller and the safety use of elevators for transporting is needed by the time 12 million elevators in the world today are in use (ThyssenKrupp-Elevator, n. d., p. 12, 13). Hence, there is no efficient and logical substitute for elevators and escalators yet, especially in high-rise buildings. Even low-rise buildings have elevators for disable people. As a result, there will be always increasing demand for new installations, servicing and maintaining existing elevators and escalators. Therefore, this industry will benefit from this growth in urbanization and constructions all around the world and no other products until now can fulfil this demand.

Internal Analysis

5. Core Competencies Analysis

Core competencies are a variety of abilities that are combined and harmonized to differentiate a company or organization strategically from others in the marketplace including technological and managerial abilities to make these core competencies difficult to imitate (Schilling, 2013, p. 118). ThyssenKrupp has launched MAX platform which is the world´s first real-time, cloud-based predictive maintenance solutions and boosted it with collaboration with Cyient, a global provider of engineering, manufacturing, data analytics, network and operations solutions, and enabled it by Microsoft Azure IoT technology in order to cut elevator downtime by half and increase availability and efficiency levels by leveraging data from elevators and diagnose potential problems as well as deliver pre-emptive maintenance service (ThyssenKrupp-Elevator, 2017, Press releases). TWIN being the world´s first elevator system with two cabins moving independently in one shaft is one of the innovations that differentiate ThyssenKrupp. It is TÜV-tested, German businesses that certify the safety and rule-compliance of products of all kinds, and has the controller Destination Selection Control (DSC) to coordinate the movement of elevators at the same conveyance capacity so that it saves 25% space (ThyssenKrupp-Elevator, 2017, TWIN). Synergy® blue is a residential silent and energy-efficient elevator system to fulfil the requirements of modern residential buildings with E.COR BLUE control to ensure high level of efficiency and comfort with seven colours by COLOUR-BOX and award-winning Bi-Colour for elevator car design to provide complete sustainable package (ThyssenKrupp-Elevator, 2017, synergy® blue). These core competencies are giving the company high level of differentiation in the marketplace.

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Details

Title
Strategic Analysis of ThyssenKrupp Elevator. General Environment Analysis (PESTEL), Industry Environment Analysis (5-Forces), Core Competencies Analysis, and SWOT Analysis
College
University of applied sciences, Düsseldorf
Grade
2
Year
2017
Pages
27
Catalog Number
V516598
ISBN (eBook)
9783346135261
ISBN (Book)
9783346135278
Language
English
Tags
Strategy, Corporate, Management, Analysis, Swot, 5-Forces, PESTEL, Products, Thyssenkrupp, Elevator, Escalator, Profit, Tax, Share, Sales, Margin, Price, Competition, Competitors
Quote paper
Anonymous, 2017, Strategic Analysis of ThyssenKrupp Elevator. General Environment Analysis (PESTEL), Industry Environment Analysis (5-Forces), Core Competencies Analysis, and SWOT Analysis, Munich, GRIN Verlag, https://www.grin.com/document/516598

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