Impact of Globalization on Siemens Market

This report highlights the impact of globalization on Siemens market and the key factors associated with it. It also discusses the strategic complexities and the influence of global operations on the structure and function of the company.

[Unit 18: Global Business Environment]
2018

Introduction-
The globalization can be associated with several challenges like access to superior technologies,
increase in competition etc and can threaten any company to have their continuous dominance.
With an ever growth sophistication among the competitor, it pose a global threat to any company
across the world. There are several strategic management approach that can counterfeit the
current challenges through public sensitization and awareness among customers to mark
difference between the fake and genuine products, making collaboration with the government
etc. However, there have been several significant opportunities provided by the introduction of
globalization as well (Donze, 2014, p 171). The market is ever expanding and making a global
economy i.e. more stable and lower risk associated with the political interference of any country
the company is dealing with. The potential of generating profits is always high and the only
thing the company need to do is to implement strategies to manage both the threat and
opportunities as swiftly as they can. Siemens is one of the multinational giant that operates in
almost 190 countries across the globe. The scope of the company is to deal with electronic
products and services. The company is highly reputed and considered to have one of the largest
among the tally of employee i.e. 400,000 people. There are six major divisions where the
company operates i.e. Energy, Equity, Healthcare, Industry, IT solutions and Investment. The
company made approximate profit of about of €5.67 Billion. It can be considered as one of the
outstanding achievement in this growing competition in the market with some major player still
competing. The headquarters of the company is in Germany (Donze, 2015, p 161). The company
these days is dealing with certain strategic issues associated with globalization and threats
associated with the market existence in the future. The scope of this report is to highlight the

impact of globalization and the key factors association with it impacting the market of Siemens.
It will also show the strategic complexities associated with global market presence. Finally, it
will discuss the impact on organization structure, function and decision making strategies of
company based on globalization.
Key Factors of Globalization driving Siemens market-
The globalization can be defined as the market system development where without any
hindrance, the services/products can be taken across the national boundaries. Further, it can also
be called as the movement of capital, information and associated factors that allow a company to
freely trade across the globe. The globalization concept has been accepted since a long time and
it has been an inevitable reality as acknowledged by the people. There hasn’t been any restriction
on the foreign investment and it has increased through formation of legislation and policies that
encourages the flow of money. The product prices are brought down for a reason because the
goods from across the world are supplied to the market that is compensating the demands and
supply ratio. The product and services availability at a low price is improving the quality of life
and hence dealing the current issue of poverty of several under developing countries. The
globalization impact in the business environment can be described with the help of PESTEL
model that determines several factors that played a role in the business of Siemens.
Political Factor-
The most common political factor that is quite relevant with the strategic management of the
organization and their policies towards government regulations on cross border transaction and
free market enterprises. The political systems are moving ahead towards the marketing economy
concept where the business across the globe would be allowed to operate without any unwanted

interference of the government. The countries such as China were having the tight control over
the economy is now making their market liberal for others. The similar move has been taken by
the countries to ensure that their market must remain attractive for the foreign investors. The
most common threat within the political factors is the nationalization risk and the threats political
bodies feel when the importance of foreign investment is not realized.
Economic Factors-
The world economy integration has been so influenced that even if a crisis happen in one
country, the whole world will start feeling the effect. It can be declared as one of the negative
aspect of globalization. One of the best example that can be cited is the recent economy crisis in
USA that ended up in paralyzing the entire world economy. The globalization has also
introduced the concept of increased competition across the world as most of the business now
looks for invading the foreign market and challenging the existing best. Siemens has always
dominated the market of mobile phones in Germany and several other European countries as
they were able to market their product without involving much hindrance. When there was an
eruption of globalization, the cheaper phones with equivalent quality was introduced in the
market by India and China and it got a big hit among the public who really don’t mind buying
cheaper product with same features. In response, the strategy taken by Siemens was to form an
alliance in order to deal with the current competition (Berend, 2016). The alliance was quite
successful hence helped in achieving the success in the current market. For example, there was
an alliance between Siemens and Nokia that won the bid for providing broadband service to the
Taiwanese high speed trains. Another alliance between Nokia and Siemens was to win the bid to
supply optical network to the Chinese company Unicom Ltd. The raw material accessibility and
the cost associated with it was another economic impact of globalization. In order to deal with

the issue, the company gains the operational setup in the emerging market such as India and
China, where they will get cheap source of labor and hence making the cost of production quite
low (Risi, 2013).
Socio Cultural Factor-
The globalization is always hailed for the growth and development of culture across the national
boundaries and hence affecting the market with preferences and tastes. It also helped in the
reduction of the expensive approaches for localization towards product development and
associated strategy for smooth running of the organization. In comparison to the past scenario,
where the products can be sold in those market that suits the local culture, several people are now
developing the taste of products that are benchmark of a particular country and love to buy it. It
has helped the multinational companies with reduced pressure as they need not modify their
products that suit the local market. Siemens mobile are highly used across the world mostly in
their original forms and without having any modification in their majority of the product. The
positive impact of this getting quickly dissipated and it is now growing the sense of having new
innovation. The population of the entire world are now looking for certain new innovation that is
forcing the companies like Siemens to look for further innovation and innovate faster to stay safe
in the market.
Technological factor-
The technology is known to be one of the vital tool that drives the strategic management of any
organization towards their operation, product development, marketing and distribution. The
globalization has led the transfer of technology swiftly from one country to other and it has been
quite easier than earlier. The information for new innovation is quite easier these dates and

creating a huge risk for the developing countries. When the technologies that are secured are
easily being received elsewhere, the developing countries uses the technology and makes the
products at low price and hence can compete with the multinational giants in terms of reduced
cost of the same products (Bhaduaria et al., 2013, p 120). China is well known for having the
capability in this context as they poses the ability to replicate the innovation that still remain
unmatched with the entire world. This aspect keeps the global giants like Siemens at high risks.
The Chinese market boomed with the incompetent manufacturer of electronic equipment, the
country has managed to maintain their quality and hence their product now can’t be called as the
low quality product. The superiority of the technology last for a while as the competitor starts
matching up the latest technology or successfully build a new technology that can provide a
product of superior quality. It actually places the multinational companies like Siemens a huge
pressure to innovate new technologies to avoid the competition risk. It is not always guaranteed
that the technology they are making will not be replicated by the other companies to remain in
the competition (Murray, 2015).
Environmental Factors-
The concern regarding climate changes and global warming has significantly impacted the
perception of people globally. A significant attention being given to the sustainable management
of the production at any company, that must not have any negative impact on the environment.
Siemens has always been one of the fore front companies that has embraced the technology
causing a minimal damage and harm to the environment. Based on an audit conducted in the year
2010, there were several weakness revealed in their production and show that there are certain
area where they can cut down on waste and can contribute towards the saving of energy by
having minimal usage. There has been a global pressure on the sustainability of the environment

and it is contributing in saving a lot of resources that could have been otherwise wasted (Stilgliz,
2018).
Legal factors-
The globalization is the significant contributor of causing legal issues, if not handled properly
can always lead to the misconducts in the business. The foremost challenge is the existence of
counterfeit. There are several legal framework across the world that are designed for countering
the issues and hence threatening the global profit margin of the companies.
Strategic complexities associated with operation in global market-
When working in the global market, there are certain complexities that the company has to
realize as it may later result into one of the major threat in their global existence. The
management of company globally is always been one of the major challenge for business since
last century. The task nature is changing and there is a huge shift of the economy activity from
Europe to USA and now in Asia, Latin America and Africa. With the fast growing market size
and the existence of a variety of competitors across the globe, Siemens needs to realize the
complexity they need to face to make their presence in the market. In general, most of the
company acquires effective advantages for longer run and make a strategic decision to achieve
the same. The strategic decision generally helps in the maintenance of business and their quality
in the global market. The strategic decision in that context mostly comprises of the
organizational activities and the analysis of the market where the company will operate in the
future. The strategic decision of Siemens is quite clear in that context. The major strategy of
Siemens is to provide a primary focus on the technology and innovation associated market
growth. Until and unless they give appropriate time for the setting up of the new technology,

they try capturing the leading position in their local market and hence creating a local value at
the global level as well.
The complexity of global existence is further reduced by the Siemens strategy of innovation and
diversification since their establishment and therefore making it an outstanding sector of
business. They also started market identification particularly the upcoming trend and starts
strategizing quite early on. Some years ago, the company also tried improving their portfolio
including four megatrends such as urbanization, demographic change, globalization and climatic
changes that has already started the influence on the daily life. The impact of these above
mentioned trends were already started increasing substantially since last decades. Siemens
activities in the sector of healthcare and energy were being the major points of consideration
when it comes to business. They were also about to claim the leading position and were equally
giving the importance to the customer satisfaction as it is one of the important entity towards
their market growth (Cook, 2015, p 61).
Siemens also bought several businesses in the past year as they thought that the global
penetration will help these businesses for their growth. In the past decade, the Siemens Company
acquired the UGS, which is one of the leading service providers of the life cycle management of
product software. Similarly few years down the line, Siemens water technology also
strengthened its service in US with the acquisition of major four companies called CEC, sunlight
system, pure water solution and Envitrol. The company also acquired a distributor of diagnostic
product called Dade Behring Holdings that use to give their services to the clinical laboratories
(Brook, 2015).

Although, Siemens always does their homework properly but the threats always lies in front of
them. In the global arena, the company faces a significant level of competition at various market
segment. Siemens being a huge multinational company having a variety of sector, the
competitions become quite higher as compare to other industries. Some of the international
competitors are Bombardier, Reliance Industries limited, Honeywell international, Philips, Tyco
international etc. Likewise in the field of energy, their major competitors are Alstom power,
Abbott and Mitsubishi etc. The presence of competition can clearly affect the revenue and the
profit margin of the company. But realizing the complexities they can have in the market,
Siemens always look for targeted business activities that lead the immense market growth of
Siemens. Siemens also reduced the complexity by attracting the customers from diversified area.
The company has now globally penetrated in the field of construction, real estate, mining and
metals, utilities, machinery and automotives as well (Beck, 2016).
Global operation influences the structure and function of company-
The existence of the companies in this complex environment has been directed affected by the
presence of globalization. For a better survival and success in the market, the organization must
adapt to the changing and evolving condition of the global market. There are several tools that
help in gaining the competitive advantages for the company such as suitable structure of the
organization and the culture that helps in serving the needs of the company as well as the market
where it is going to operate. The company structure and function are mainly divided into two
levels. The one is through invisible shared values and through the norms of group behaviors
(Lane, 2014). The culture of the organization generally differs from the market where they
currently operates. For instance, Siemens basically started their business in Germany and other

European nation and that has completely different scenario as compare to their current
penetration in the Chinese or Indian market. Their structure and function will vary when they
cross the border because of the change in culture and belief of two different sets of market
(Elola, 2014, p 989). The company is required to diversify their structure and function according
to the nation they are currently penetrating and adapt according to the physical location of the
company. It is because; Siemens has realized that each employee working in the company is also
a stakeholder. The globalization also helped in the emergence of international networks within
the economic system and in their simplistic sense, Siemens has always referred to deepening,
widening and speeding of the interconnection globally. The globalization also created the
demands in the cultural, political and economic aspect that the organization is going to take into
account (Fristich, 2015, p 789).
Here the business strategy is very important to keep the structure and the function of the
company flexible with a new market penetration of the company. The roles of leadership are
vital in maintaining these. Siemens has always been proven lucky in terms of achieving good
leaders who helped the company to maintain the structural functional integrity. The globalization
also deprives people having a shared base for their normative orientation. The leaders always
realized the importance of stakeholders and made them as their new partners for interaction.
There has been change a significant change in the interaction mode and helped the leaders to get
external stakeholders from outside the countries for the job. There was a significant increase in
the competition as well and at the same time the social expectation was also on a rise in terms of
business conduct. The company also became successful in achieving a strong balance between
the social and economic goals. Based on the McKinsey 7s model of organizational structure, the
global operation influence was realized-

Strategy- The strategy of Siemens was always simple as they believed in technology and
innovation. They always looked at the top position through their diversification and innovation.
For example, they always took a short term strategy and aligned it with the other 6s in the model
to achieve a greater success.
Structure- Siemens has started their venture with electronic and technological equipment but now
they have several divisions such as healthcare, energy etc. They are always been kept separate
and any issues within the division will not have any influence on the working and profit margin
of other. The company always tried keep things most visible and easy to change.
Systems- The procedure and the processes of the company reveals the daily activities and the
ways decisions are made. It keeps the business of each division quite focused.
Skills- Siemens has always rewarded their employees for their performance and attracted the
skills with their good salary packages. They always believed in new strategy and structures
implementation in the company that supports growth and global penetration.
Staff- The company always hired skilled staff and followed a tightly regulated culture of
recruitment, training, motivation and rewards.
Style- The company has maintained their style at top level since they launched their first product.
They always believed in providing a superior quality products and services and the style of
management and leadership has led the company to achieve the top spot.
Shared values- Siemens have always followed the standards and codes in every aspect of the
society, whether it is health of the employee or sustainable development, the companies always
followed the rules and tried abiding to it to the best way possible (Crane and Matten, 2016).

Influence of globalization in Siemens decision making strategy-
The globalization has heavily influenced the decision making strategy of Siemens. The people in
the world are worried about the fact that whether any decision will be taken in their favor or not.
It is because of extreme diversity exist in the market, people have difference choices, preferences
and taste etc, giving it a hard time for any company to understand what people wants. The
decision making is not always done in favor of the local people, instead the company always
looks at the mass. But for Siemens, meeting the needs of locals is always been the key towards
their business performance (August et al., 2014). Siemens is currently operating in more than
190 different countries. The executives of the Siemens whether they are in Germany or anywhere
across the globe must be taking the decision as per the best interest of the local shareholders.
Most of the multinational companies have several capabilities and have the right to take decision
as per their activities separately. In case of Siemens, one thing is realized that it is not always
efficient to manufacture or design their range of products in all the countries they are currently
operating. The decision they have taken is to concentrate manufacturing is the efficient way to
keep the scale of economic through the specialization. They also realized that the product can be
manufactured at a particular place and then be shipped to any place in the world. One of the
threat for the multinational company is fluctuation in currency. There can be a significant
variation in the price for the product supplied because of a certain change in the currency. In
Siemens, there is an internal risk management team that keeps a check on such threat and avoids
having a significant damage on the price of the products.
Conclusion-
The market is ever expanding and making a global economy i.e. more stable and lower risk
associated with the political interference of any country the company is dealing with. The

potential of generating profits is always high and the only thing the company need to do is to
implement strategies to manage both the threat and opportunities as swiftly as they can. The
complexity of global existence is further reduced by the Siemens strategy of innovation and
diversification since their establishment and therefore making it an outstanding sector of
business. The globalization concept has been accepted since a long time and it has been an
inevitable reality as acknowledged by the people. There hasn’t been any restriction on the
foreign investment and it has increased through formation of legislation and policies that
encourages the flow of money (Dobrin, 2016, p 161).
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