Impact of Global Factors on Siemens AG: Business Environment Report

This report provides a comprehensive analysis of the global business environment, using Siemens AG as a case study. It begins with an introduction to globalization and its impact on businesses, highlighting the importance of international expansion. The report then critically analyzes the impact of key factors, such as cost, market, environmental, and competition, on Siemens AG's operations. It further delves into the strategic challenges associated with operating in a global environment, including international trade law, risk management, and supply chain complexities. The report also evaluates global market influences using the McKinsey 7S model and Hofstede's cultural dimensions, providing insights into how these frameworks affect Siemens AG's strategies. Finally, it examines the influence of globalization by analyzing key barriers to international business. The report concludes by summarizing the key findings and implications for Siemens AG's global strategy.

Global Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
Activity 1.........................................................................................................................................1
Critically analyse the impact of key factors on the global business environment......................1
ACTIVITY 2....................................................................................................................................2
Determine various strategic challenges associated with operating in a global environment......2
Activity 3........................................................................................................................................4
Critically evaluate the global market influences by using appropriate theories ........................4
Activity 4.........................................................................................................................................7
Influence of globalisation by analysing key barriers in doing business internationally............7
CONCLUSIONS..............................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
In today's complex business environment it has become necessary for the organisations tp
expand their business activities at a global level and to earn maximum profit and maintains long
term sustainability in market (Black, Morrison and Gregersen, 2013). Hence Globalisation refers
to the way where companies expand their operations beyond national boundaries and serve needs
of customer. Many companies benefits as well as face challenges in global business
environment. This report is based on Siemens AG. It is a globally operating multinational
company which specialises in electronics and electrical engineering and has a turnover of £53
billion, headquartered in Munich, Germany. It operates in more than 190 separate nation states.
This report covers the impact of various key factors on global business environment. It also
evaluates strategic challenges and global market influences faced by Siemens. At last it analyses
various key barriers in expanding business internationally.
Activity 1
Critically analyse the impact of key factors on the global business environment
When the company expand its business operations globally it face various challenges as
well as get benefits from them which makes its long term sustainability in market. Therefore
Siemens AG has to analyse impact of various factors and formulate strategies accordingly in
order to attain goals and objectives. Impact of various factors on global business environment is
discussed below-
 Cost factor- This factor is very crucial to be considered in doing business internationally.
As the Siemens AG is operating world wide it requires huge amount of investment for set
up and also needs huge finance to produce goods according to local people needs. This
proves to be a challenge for the company as large amount of cost is incurred by the
company in operating globally and lot of research has to be conducted in order to
determine and meet local people needs and requires use of modern technology which
incurs heavy investment for the company. Benefit of this cost factor include Siemens to
increase its productivity by producing large scale of products according to specific needs
of people thereby capturing larger market share and targeting maximum customers. It
also assist to makes a high goodwill in the market (Cavusgil and et. al., 2014).

 Market factor- Changes in customer needs and demands influences Siemens AG to
consider market factor while planning to operating internationally. As the company
operates globally Siemens should analyse the needs and demands of local people. It
would benefit the company to maintain economies of scale and earns maximum profit
through providing specialised product according to demand of particular market. This
proves challenge for the company to produce goods according to local market needs and
also need to hire employees with high skills and capabilities to perform multiple
operations . This would incur high cost for the company.
 Environmental factor- Companies operating internationally has to consider different
environmental factors such as political, social, legal and technological environment.
Considering these factors will assist the company to understand rules, laws of the
respective countries and formulate plans and strategies, company starts producing goods
by using enhanced technology and according to local people needs which makes them to
earn maximum profit and attains long term sustainability in market. This factor would be
a major challenge for the company as they have to face various governmental laws and
regulations which varies in different countries. This makes them difficult to perform and
operate with different policies, rules and regulations and makes business process a
complex one.
 Competition- In order to succeed globally, Siemens AG should determine the level of
competition in specific countries and implement strategies which provides superior
quality products according to customer needs , this way they can be ahead of their
competitors. This factor greatly benefits the Siemens as they provide wide variety of
specialised products according to local market needs and captures larger share of market
in US (Kasemsap, 2014). This aids an competitive advantage to the company in attracting
and retaining customers towards the product. But the major challenge faced by the
company is that they have to analyse competitors strategy such as pricing and
promotional strategy and frame strategies accordingly otherwise company may result in
losses and would capture lesser market share.

ACTIVITY 2
Determine various strategic challenges associated with operating in a global environment.
When companies operates internationally, it not only provides scope of meeting customer
requirement and attaining maximum profits but also faces various strategic complexities
associated with it. Hence, Siemens AG determines various strategic challenges which are
associated with operating globally are discussed below-
 Impact of international Trade Law- International trade law includes various rules and
customs that are governing trade between countries. As Siemens company has multiple
production units which leads to export and import of its goods. This affects the
functioning of business practices at a global level. There are different trade policy,
customs and tariffs along with this various cultural, economic, political and social factors
which have a great impact on international business . This impacts the way companies
operates internationally and also impacts trade relations between nations (Laudon and
Laudon, 2015).
 Risk- When the company operates globally it get benefits from its geographically diverse
business. Along with this it faces various risk. There is lot of risk in doing business
internationally which includes risk of cultural differences, political influences, risk of
language and the major one is risk of certainty that the products manufactured would
meet customers needs or not and they could be ahead of competitors or not. This is major
strategic challenge as in order to perform efficiently risk should be properly analysed
plans and strategies should be framed accordingly in order to minimise impact of risk and
able to perform business operations efficiently.
 Complexities of international supply chain management- In order to have proper
supply and distribution system, managing suppliers and supply chain can be a difficult
process. Supply chain complexities refers to the interconnection of one or the element in
the network where change in one element may cause effect to the others (Lee, Olson and
Trim, 2012). Respective company is operating globally and has multiple production sites
which sometimes lead to supply chain complexity. As the case reveals that particular part
of the business when requires product parts it can directly export from other production
units. Therefore in order to avoid long supply chain, company uses unethical practices to
deliver their products. This is most strategic challenge faced by the company in

choosing the most relevant supplier who could deliver products at a faster rate and assist
the company to perform efficiently.
Activity 3
Critically evaluate the global market influences by using appropriate theories
When companies operates globally they face global market influence because of the
varied demands of the customers as well as political and legal influences on their organisations.
In order to earn more profits and attains long term sustainability in its business, it has become a
trend to expand business globally (Ramamurti, 2012). In order to evaluate global market
influences , Siemens AG is using different theories which are discussed below-
McKinsey 7S model of organisational structure
It is a tool which is commonly used by the organisations to assess and monitor changes in
internal situations of an organisation(McKinsey’s 7S Model). This model consist of 7 elements
such as strategy, structure, systems, shared values, styles, staff and skills which are
interconnected and interrelated to each other . It will assist Siemens AG to analyse global market
influence which allows company to improve their performance by proper framing of strategy.
Seven elements of this model are categorised as hard and soft elements .
Hard elements- These are identified easily and could be changed according to needs. It includes
organisational strategy, structure and systems.
Soft elements- These elements are often difficult to describe and includes organisational shared
values, skills, styles and staff.
Hard Elements
 Strategy- Strategy consists of the plans and tactics that a company formulate in order to
build competitive advantage over its competitors. When the company operates globally it
is necessary for them to formulate strategy according to specific country business
environmental factors. In order to reduce global market influence, Siemens works with a
new global strategy that is 'Siemens One' in which customers can call upon the potentials
of other Siemens Group as if one production unit employees does not posses a skill,
another will have. This will assist in continuous production and supply of products
(Savrul, Incekara and Sener, 2014).

 Structure- As the respective company has multiple production sites which are operating
in different countries. Though the company operates in various countries it report to
German Parent company. All business units produce goods according to specialised local
needs. This suggests that company has different structures of departments which perform
differently to each other. But all the business activities are controlled by parent company
in Munich.
 Systems- It defines the processes and procedure that is used by respective company to
produce goods. In consideration to this Siemens AG has a unique system of process to
produce goods according to demands of local market conditions (Simic and Dimitrijevic,
2012). It has also a global market influence as the processes need to be adopted
according to the environmental factors as well as technology most preferred in respective
country.
Soft Elements
 Shared Values- It determines the policies and values of Siemens AG which has a impact
on workforce and management. Respective company shares common values and beliefs
to operate their business in a ethical way and produces goods according to local people
needs. This way it will not be affected by global market influence.
 Skills- It determines the capability of an employee to work efficiently. Siemens AG has
perform globally which requires large number of employees to perform business
activities. As the respective country operates globally and produces specialised products,
it has a greater market influence and should recruit employees who have the potential to
perform various activities as per the changing demands of the customers.
 Staff- Siemens AG is a globally operating firm which employs more than 450, 000
people and has operations in more than 190 states. Company should recruit employees
according to skills and capabilities required to perform multiple tasks. It has a greater
market influence as right people at right time with adequate skills and capabilities are
needed to perform business operations in order to maximise profits by meeting customer
requirements (Solomon and et. al., 2014).
 Style- In Siemens AG democratic style of leadership is adopted which creates a friendly
and harmonious work place environment. As the respective industry is operating globally
it faces large competition In order to avoid global market influence managers at Siemens

AG should delegate the responsibility to its employees which makes them motivated to
perform effectively and efficiently and makes them ahead of their rivals.
Hofstede’s Dimensions of Culture
As a result of different perceptions, varied culture, attitudes and beliefs of an individual
in organization it has a greater global market influence. Hofstede’s cultural dimensions includes
major six cultural dimensions. Siemens AG has adopted Hofstede’s Dimensions of culture to
determine ways in which company is influenced by globalization which has been discussed
below-
 Power distance index- It is discussed that members in the organizations feel that power
is distributed unequally among employees. If Siemens AG will create high PDI then it
would lead to complex hierarchies and will demotivate employees which results in
ineffective performance. It greatly affects organizational culture and has a global market
influence. According to this model, if there is low PDI in UK it will result in flatter
organizations and would consider supervisors and employees equally and will result in
effective functioning of work. As compared to its operations in Germany high PDI in
country will not initiate action and would likely to be guided and directed to complete the
task.
 Individualism v/s collectivism- It is concerned with employees in the organization wants
to perform individually or collectively at Siemens AG. Company should make the
employees work collectively which would assist them in effective realization of goals.
High collectivism will make the employees works complex task and therefore enhances
their skills. This also enhances organizational culture as employees feel happy and
motivated and works effectively (Voegtlin, Patzer and Scherer, 2012). In sweden when
there is low IDV it will put focus on building skills and maintain harmony among group
members, but its operations in UK with a high IDV puts emphasis on people time and
provides them enjoyment of challenges and expectation of rewards for hard work.
 Uncertainty avoidance- It describes to the way in which people in the society are not at
ease to face uncertainty. Employees at the respective company should be prepared to face
any contingencies while operating globally and makes plan appropriately in order to
overcome those challenges. This would not disturb the organizational culture at the time
of facing challenges and makes them work innovatively with high dedication towards

their work. As compared to its business operations in UK with a low UAI focuses on
openness to change and is more concerned to open ended learning. But as compared to its
operations in Germany with high UAI it focuses on conservative and rigid behavior,
individuals also show anger when they feel that they are bound towards their life by high
load of work.
 Masculinity vs. femininity- This refers to the distribution of roles between men and
women according to different characteristics such as assertiveness, cooperation and
modesty. Siemens should consider both the factors in order to avoid cultural differences
and maximize profits. It will make the company relationship oriented and will assist in
achieving maximum profits and avoids global market influence. As Siemens operates in
Japan it has major men score which involves the strong ego and feeling of pride, money
and achievement are important. But by comparison it to Sweden its a feminine society
focuses more on relationship oriented and proper quality of life.
 Long-term orientation vs. short-term orientation- Respective company should work in
a way that is able to achieve long term and short term goals. If the company focuses on
only long term goals it disturbs organizational culture as it makes the employee only
focus on long term goals and would not take into consideration short term goals. As it is
main operated in UK it has along term orientation people are concerned with working
effectively and how to achieve the stated goals. But compared to its operations in Sweden
it focuses on short term orientation to achieve short goals within specified time period.
 Indulgence vs. restraint- Employees with high indulgence enjoys their life on their
emotions whereas restraint employees are more concerned on their conduct and behavior
according to the social norms (Wetherly, 2014). In order to have a preferred
organizational culture company should allow employees to maintain work life balance
and assist them to work enjoying their life and attains targets. Such type of culture
prevailing in organization helps them to succeed and maintains long term sustainability
in market. As Siemens operates in UK it has a high indulgence and focus on personal
happiness and freedom to employees but its operations in Germany are high restraint are
often pessimistic and controlled.

Activity 4
Influence of globalisation by analysing key barriers in doing business internationally.
When the company plans to expand business internationally then they have to face and
overcome various key barriers in terms of high cost and investment , language and cultural
barriers as well as working and navigating with new legislation and technological factor act as a
barrier in doing business internationally. In order to avoid such challenges Siemens should be
flexible enough to adopt to new changes and works efficiently. Prior operating internationally
respective company should analyse barriers and formulates effective strategies in order to
overcome such challenges. Various key barriers for doing business internationally are discussed
as follows-
 High investment and Cost- As the company operates globally, it has multiple
production sites. This requires heavy investment for the company to set multiple
production sites and produce goods according to the needs of local people. Siemens have
to make investment regarding research work in analysing demands of local market and
produce goods accordingly. Along with this it also requires heavy investment in the form
of allocation of resources to different production sites which makes it a costly process to
expand business operations internationally (Wild, Wild and Han, 2014).
 Language and cultural barriers- When respective company operates internationally it
is faces language and cultural barriers. As in different countries they have different
languages, attitudes and beliefs of customer. Respective company should be well versed
with the local language as well as produce goods according to the demands of local
people. If the company doesn't operates according to needs and demands of local culture,
then it would be a barrier for them to expand and succeed internationally.
 Navigating with new legislation- Different countries have different laws regarding their
performance of work. This creates a barrier for the company to expand internationally. It
becomes difficult for the country to examine various various laws, taxation policy and
legal cost of operating business. Siemens should examine such legal acts of different
countries before expanding business at international level.
 Technological barrier- It is difficult for the company to adopt every recent and latest
technologies according to market demands. As Siemens is operating globally, it has
various production sites which manufactures product according to local demands. It

would be a heavy investment for the company as use of advanced technology for
producing different products and meets customer satisfactions (Zhang and Huang, 2012).
These are the barriers to Siemens as with it will pose a greater challenge to the firm in expanding
business internationally. In order to overcome such barriers there are some recommendations
given below-
Recommendations-
 To overcome cost and investment barriers, respective company could start partnership
with other companies besides this they can take information from already existing firms
about the market demands, this would assist in minimizing cost.
 To overcome cultural barriers it is essential for the company to examine language, ethics
and attitude of the people regarding product and service. Siemens AG should provide
goods according to culture of the specific country and attains maximum profit.
 To overcome technological barriers it is essential for them to adopt to recent technologies
or produce multiple products with same technology which is acceptable to the individuals
of particular country.
 To overcome legislative barrier, it is essential for the company to work according to the
legal aspects of the specific country and the products manufactured should mply with the
legal laws.
CONCLUSIONS
From the above report it has been concluded that expanding business globally is essential
for the company in order to attain maximum profits and long term sustainability in market. As
Siemens group operates internationally and is a global leader in electronics, main strategy
adopted by them is to produce goods according to customer needs. This benefits the company in
gaining larger market share. By the use of McKinsey7s model and Hofstede dimension of culture
it evaluates global market influence related to organization structure and culture. It also analyses
various key barriers that creates problem for company to expand business internationally.

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ONLINE
McKinsey’s 7S Model. 2016. [Online]. Available through:<https://www.educational-business-
articles.com/7s-model/>.