Siemens AG
With upwards of $103,124.8 million in annual revenues in 2010, Siemens AG is an electrical engineering and electronics conglomerate with global operations, engaged in the manufacturing of health care, energy and industrial products. It has operations in 190 countries across the world, employing 405,000 employees.
Strategic and tactical Decisions
Siemens sold off its real estate division to Wohnbau, Volkswohnung and GBW Gruppe in 2009, followed by the 28% acquisition of Archimede Solar Energy, which is based in Italy. The company did also acquire a 25% stake in Germany’s BGZ Beteiligungsgesellschaft Zukunftsenergien (BGZ), which is specialized in the financing, development and operation of renewable energy sources including solar, biodiesel and wind energy. Further, the company acquired Israel’s Arava power for $15 million, extending its solar energy reach in Israel to take advantage of the vast desert regions of the country and in the Middle East. The company did as well seek strategic vertical integrations with electricity and utility companies, besides automating the majority of its energy generation and distribution operations. Automation of its production and other operations was geared at boosting the firm’s efficiency in production, which ultimately resulted into increased profitability of the company.
With these vertical integration measures, the company not only established its presence in solar markets in Germany, Italy and elsewhere in the market but perhaps most crucially, gained access to the helpful technologies and patents that are owned by the companies that it bought a stake. Vertical integration with power and utility companies did help the company to streamline its operations, reduce management and operational overheads and ensure the economies of scale are realized. The sell offs ensured that the company has sufficient resources to seek expansions in the green energy sources. These were coupled with the seeking of mergers with corporations that could offer financing for its solar and other alternative energy divisions, especially owing to the relatively low demand for solar energy sources in comparison with hydroelectricity, nuclear energy and coal powered generators.
Diversification of its solar markets and capacity to efficiently deliver the products to the clients without having to incur massive transportation costs. Siemens AG has continually sought to expand its alternative energy portfolio to include automation services, construction and lighting solutions. The company is a provider of power generation, power distribution, exploration and extraction of gas and oil among other services and products. The movement away from its conventional products and the increased investment into solar and other alternative fuel sources has been triggered by the emergency of hybrid cars and technologies that have boosted battery technologies and solar concentration, effectively increasing the efficiency of solar as a source of energy, at the time when fossil fuels are facing a crisis.
Information Requirements
In order to enter into successful horizontal and vertical mergers, it is crucial to have information about the demand for Siemens AG as well as the products and industry in which the target companies operated in. These include information about the revenues of the target company, and the levels of competition in the respective industry. In addition, it is critical for Siemens AG to have information about the risks of making such horizontal and vertical integrations, which may come from the anti-trust legislations in the EU and elsewhere across the world and other economic, political, social and technological factors prevailing both in Siemens AG and in the target industries. Of particular interest are the environmental regulations, which do include tax and investment incentives in the wake of global warming, which will ultimately render investments into the new solar energy ventures relatively more profitable than if these incentives were unavailable. There have been multiple legislations in different countries across the world that encourages carbon trading, green energy investment and technologies, which has served to induce increased investments into the industry.
Assessment of the demand, market and overall industry factors is necessary in order to reach strategic decisions on how to position Siemens AG and its acquisitions, in order to take full advantage of the parent company and the Siemens technological, human capital and other resources to boost the competencies of each company. In order to help the optimal positioning of the company, Siemens AG does as well require information on the current or potential competitors’ company structure, ownership and amount of resources available to them. This serves an important role in tailoring Siemens AG competencies to best fit into its present as well as the new markets in which it has sought partnerships (Ghosh & Prelas, 2010, 77). Further, information about the competitors’ products, strategies as well as possible prospects is significant. This forms the basis for its own strategies, business and product innovations to counter the competition.
Competitor Intelligences
(i) Research & Development Spending
Research and development spending is a great indicator to the level of innovation that would result from the competitors’ efforts. Presently, General Electric, Solar and Mitsubishi Heavy Industries have higher R&D spending than Siemens, which may put the company at a competitive disadvantage in the future (Lien, 2008, 184). This is according to Wu, Lang, Zargari & Kouro ( 2011, 91), particularly relevant in the solar energy industry, given the fast changing technologies that have been geared at increasing the efficiency of solar as a source of energy. In addition, monitoring of the R&D spending trends, gives an indication of the direction of innovations that the industry is prioritizing, which allows the company to effectively appropriate it own R&D resources ($5293 million).
(ii) Product Innovations and patented competitor technologies
Monitoring R&D spending is inadequate in the determination of the innovation trends in the market, without a close monitoring of the competitors products. Early this year, Solannex took Miasolé to court over patent infringements, a development that could be relevant to Siemens AG given the fact that it owns upwards of 80,000 different patents. This presents an important opportunity to patent troll and extract lucrative partnerships or shut off competitors’ products
(iii) Expansion Strategies
General Electric has expanded its Chinese and Brazilian operations, with increased investments in the developing countries, which have massive energy deficits and potential for non-grid sources of electricity. Creation of new markets is critical in spurring growth in the future
(iv) Mergers and Acquisitions (gives access to patents)
Instead of companies developing different technologies separately, mergers and acquisitions give them instant access to critical patents, while at once giving them a competitive edge over Siemens AG (Lien, 2008, 184).
Market Research Items
(i) Growing Demand for Alternative Energy Sources
The green gold revolution experienced considerable growth rates prior to the global economic crisis, largely because of the high and rising oil prices, which are bound to continue growing. While the solar energy market size remained below 15 billion in 2006, it is projected to expand to upwards of $64 billion by the close of 2016, representing massive opportunities for growth of the Siemens AG Solar portfolio, as well as the rest of the competition. In addition, there is a change in attitudes of energy consumers, brought on by the increasing consciousness on global warming and greenhouse gasses emissions.
(ii) Changes in the Legal & Environmental Regulatory Framework
Government legislation on the environment, taxation and repatriation of returns to the mother company are bound to have a far-reaching effect on the company’s 190-country operations (Lien, 2008, 184).
(iii) Increased Efficiency is key
The stern competition presented by biodiesel, which has found easy application in industries and motoring, while wind energy presents enormous potential and increased efficiencies, which makes it mandatory for Siemens AG and other players in the solar energy industry to boost its efficiency and cut back on the prices, in order to boost its competitiveness (Ghosh & Prelas, 2010, 77). This even more important if solar, wind and other alternative fuel sources must viably replace oil as a source of energy.
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