Globalization And Its Impact On Siemens: Strategic Recommendations

Overview of Siemens

Discuss about the Managing Corporate Citizenship And the Sustainability.

Siemens is the largest industrial manufacturing company from Germany having its headquarters situated in Munich and Berlin. It has its branch offices located all across the globe. The key divisions which represent the main activities conducted by Siemens are Healthcare, Industry, Energy and Infrastructure and Cities. Siemens is also known as a global powerhouse whose main focus is on digitalization, automation and electrification. Approximately 377,000 employees have been employed by Siemens across the world and have declared its global revenue to be nearly €83 billion for the year 2017 (Siemens, 2018).

Globalization, as a contextual factor, can be defined as the process with the help of which organizations and businesses develop international influence or initiate its operations on a global scale. In other words, it is a market system in which goods and services can move across the boundaries of the nation without any interference (Hirst, Thompson & Bromley, 2015).

The basic objective of this report is to provide strategic advice to the Chief Executive Officer (CEO) of Siemens in order to enhance the overall performance of Siemens.

For the purpose of providing strategic advice, the impact of globalization on Siemens has been assessed. Moreover, critical issues around the contextual factor globalization have been identified.

The assessment of globalization in the context of Siemens provides that it plays an important role in changing the way it performs. Globalization has resulted in the opening up of the economies for international trade which in turn has brought stabilization in the economy.  This stabilizing effect caused by globalization is good for businesses like Siemens as it has helped in minimizing the effect of recession (Reader, 2017).

Moreover, competition has subsequently increased all across the globe as businesses increase their operations in the foreign markets. The growth objectives of an organization can be achieved through the theme of international expansion. However, this competition also has the capability of resulting in diminishing returns for the businesses.  Siemens also faced this feature of globalization as a challenge. Earlier, mobile phone markets in European countries and Germany were dominated by Siemens as they were capable for selling their products at premium. Globalization resulted in the inflow of cheaper mobile phones from countries like China and India and obtained a major share in the market amongst the low end customers. In other words, a number of threats are presented by globalization in the way of Siemens’ success due to increase in competition from the domestic companies. Multinationals like Siemens have the capability of influencing the political systems across the globe with the practice of regulatory capture incorporated by them (Ahmad, Iqbal, Javed & Hamad, 2014).

Assessment of globalization on Siemens

Siemens also suffers from the economic impact of globalization in terms of accessibility of raw materials which significantly drives down its costs.   Siemens have made the full exploitation of the gains from globalization by setting up the operations in emerging markets like China where here is considerably low cost of production (Grossman & Helpman, 2015). This has enabled Siemens to price its products in a more competitive manner and has provided a chance of performing well in the global market. Furthermore, globalization has welcomed the growth and development of global culture which significantly affects the tastes and preferences all across the globe. The world population continuously looks for innovative products which has increased the research and development costs of Siemens in order to compete with the major players in the market (Dunning, 2014).  Moreover, the quick transfer of technology facilitated by globalization from one country to another has placed Siemens into risk. This is due to the fact that superior products are the only key to defeat the competitor in the market. However, the success of such innovations can never be guaranteed as competition can always replicate or outmatch such innovation. The technological improvements brought by globalization result in the problem of counterfeits. Siemens continuously face threats from such counterfeits as other small companies are ready to take the advantage strong brand established by Siemens (Narula, 2014). Also, the global perceptions are significantly affected due to the concern regarding climate change and global warming.  Therefore, Siemens is pressurized to ensure that minimal harm is caused to the environment due to production activities and technologies. Such environmental sustainability pressure assists Siemens in saving significant amounts which would otherwise have been wasted (Crane & Matten, 2016).        

There are a number of critical issues related to the contextual factor i.e. globalization.

Though globalization has resulted in creation of employment opportunities by Siemens across the globe, but this is not the case in the local market (Holton & Turner, 2015). Siemens is affected from the social perspective as it also has some obligations towards the society it operates in. when people are hired from some other country for working for the organization, employment opportunities are created in that particular country and not in the country from which the company originates.

Another issue related to globalization includes recessions and depressions. This is one of the most negative effects arising out of globalization on businesses.  Earlier, the companies were only impacted by the financial situations concerning their own countries. But due to globalization, dependence has been created among the countries greater than before. This has led to the sufferings of the businesses such as Siemens due to recessions and depressions faced by other countries also.

Critical issues related to globalization

Issues relating to globalization also include unfair payments of salaries and wages. Same company pays skilled labor in different manner in different companies. Therefore, it can be concluded that the payment is made to the workers in accordance with their market worth and not according to what they actually deserve. This also results in increased employee turnover, strikes and problem with the unions (Losonc, 2016).

Global businesses like that of Siemens face threat from the cultural barriers. Challenges are also faced in the communication of the benefits of products and services and in their branding. Products are used differently by different cultures and therefore they do not actively respond to same marketing messages. In other words, planning and other costs are required for effective marketing (Beck, 2018).    

Another issue that arises due to globalization is of the costs of doing business. This case is true even for a business that aims to reach the global audience through internet. The common costs linked with the globalization of business include researching every foreign marketplace, setting up equipment infrastructure and building, hiring talented employees from the local market, making the use of translators for internal communication, creating global advertisements and undertaking transportation of goods.

Siemens is facing pressure both in home and foreign market for supporting the population served by them. Customers expect such a big brand to contribute towards charities and education along with providing assistance to communities belonging to the struggling countries. There is a great contribution of internet in this challenge as it allows easy sharing of information on the global front (Kwakwa, 2017).  

Following are the series of recommendations, which can enhance the performance of Siemens.

There are growing concerns about sustainability in the market. Some efforts have already been initiated by Siemens for ensuring conservations in the process of production (Najam, Runnalls & Halle, 2016). However, it is recommended that this effort of Siemens should be complemented through the production of products that are energy efficient which are capable of running on less energy for a longer time period. This will assist Siemens in getting approval from the global market and result in better financial performance (Wheelen, Hunger, Hoffman & Bamford, 2017).

Moreover, globalization has caused significant effects on competition for Siemens. Consumers now believe that durability and quality go hand in hand. It is recommended that Siemens should aim at exploiting the preference of the customers for quality products by branding its products as premium products thereby solidifying its market leadership.

Recommendations to enhance the performance of Siemens

Multinationals like Siemens require constant innovations in their products for the purpose of maintaining their image in the market as most innovative producer of products and services.  It is recommended that Siemens should enter into strategic alliances which will enable it to take maximum advantage of the relationship between its trading partner and its faithful customers for gaining entrance into newer market segments (Mazzucato, Perez, Fageburg, Laestadius & Martin, 2015).

Siemens is also recommended to obtain full advantage of the growing political support for investments in foreign countries for reaching greater number of markets in the host economies. Growth of Siemens will be assured when it will reach these additional markets by way of aggressive growth of production and distribution (Pieterse, 2015).   

Counterfeits have become a rising problem on the global scale. The products of Siemens have also been counterfeited resulting in loss of market trust and revenue. It is recommended that a competitive strategy should be embraced be Siemens by way of joining hands with the competitors in order to come up with the ways of overpowering the vice.

Conclusion

Therefore, it can be concluded that globalization can be either positive or negative on the basis of the opinion of an individual. Serious challenges are presented in the ways of the organizations such as increased competition. On the other hand, wide range of opportunities is offered by globalization to the business organizations by way of lowering the production costs through providing access to cheap labor and raw materials and opening up additional markets. Both challenges and opportunities are faced by Siemens as a result of globalization. The main threats faced include rise of counterfeits and increased competition which in turn threaten its market share.  However, opportunities have also been offered to Siemens in the form of expansion of its business to a number of countries with lower cost of production.  Moreover, the report also identifies some critical issues related to globalization such as shifting in employment, recessions and depressions, cultural rifts, costs and unfair payments. This report also made some recommendation which can enhance its performance in the market and enable it to achieve its growth objectives.

References

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