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Corporate Strategy – Case Study Group B

ETH Zurich, 28.November 2011
Reto Kurmann - Stephan Henggeler - Samuel Mettler - Cyril Hollenstein – Jürg Gurtner

Case Study - Group B

Agenda

28.11.2011

ETHZ - Corporate Strategy

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2001 B7 – Snowmobile launched A brand new industry: Snowmobiling New company name: Bombardier Limited The company went public Acquisition of Lohnerwerke GmbH Several acquisitions in rail transportation (become one of the leading suppliers of rail cars) Aerospace Transportation Recreational Products 1986 Acquisition of Canadair 28.11.Case Study . Introduction Bombardier Case History of the company Bombardier • • • • • • • 1937 1959 1967 1969 1971 1971 .Group B 1.Corporate Strategy 3 .2011 ETHZ .

7 2 = G CA R 28.Group B 1.Case Study .1 1 = % G CA R PBT last 6 years % 6. Introduction Bombardier Case • Revenue and Profit development of Bombardier Revenue last 6 years 8.11.2011 ETHZ .Corporate Strategy 4 .

Corporate Strategy 5 .Case Study .11.Group B 1. Introduction Bombardier Case • Revenue by Region of Bombardier 28.2011 ETHZ .

11.Corporate Strategy 6 .Case Study .2011 ETHZ . Introduction Bombardier Case History of the company Adtranz • • • • 1990 1995 1999 2001 ABB Verkehrssysteme ABB Daimler Benz Transportation DaimlerChrysler Rail Systems Adtranz Adtranz as a company was twice the size of Bombardier 28.Group B 1.

Group B Agenda 28.Corporate Strategy 7 .11.Case Study .2011 ETHZ .

Group B 2. Questions • • • • • Should Adtranz be absorbed or preserved ? What organisational structure would you propose if the merger succeeds? Where would you put headquarters? What other possible challengers do you foresee after the merger? How can they be avoided/minimized? 28.Case Study .11.Corporate Strategy 8 .2011 ETHZ .

2011 ETHZ .Group B Agenda 28.Corporate Strategy 9 .11.Case Study .

Corporate Strategy 10 .Case Study .Group B 3. Organizational Structure • Bombardier Structures: five geographically-based operating units one market/functional unit North America Atlantic Europe Continental Europe Mexico China Total Transit System 28.11.2011 ETHZ .

11. Organizational Structure • Adtranz Structures: product segments functions Product Segment Functions • high speed trains • cars • subway trams •… • bogies • drives • car bodies •… 28.Case Study .Group B 3.2011 ETHZ .Corporate Strategy 11 .

2011 .Case Study . ETH 2011) • Type of Aquisition o o o Horizontal Aquisition Market-extension Product-extension • Motivation o o Monopoly Theory Efficency Theory ETHZ .Group B 3.11.“ (Source: Späth.Should Adtranz be absorbed or preserved? • Merger or Aquisition ? „An ‘acquisition’ normally involves the purchase of another firm’s assets and liabilities.Corporate Strategy 12 28. with the acquired firm continuing to exist as a legally owned subsidiary of the acquirer. Organizational Structure .

Organizational Structure • Should Adtranz be absorbed or preserved ? o Absorbed − Adtranz is a „bunch“ of companies − No real culture − Lack of Management Skills but: o Smooth Integration Process • keeping Adtranz Organization initially consistent • transferring Management Skills • Integrate Solutions/Skills in Bombardier Division 28.11.2011 ETHZ .Group B 3.Corporate Strategy 13 .Case Study .

Corporate Strategy 14 • • • Level 2: Industry Divisions o o Level 3: Aerospace o Level 3: Transportation o o 28. Finance.Case Study . Transportation (2/3). Organizational Structure • Level 1: Global HQ functions o o o Capital Group Cooperate Functions: Strategy. Recreational Products (5%) (in 2001) Goal to divest Recreational Products Global division with functional organisation Geographically-based operating-units (from Bombardier Transportation) Level 4: Product and Service oriented ETHZ .Group B 3.11. Legal Cooperate TQM – Business Excellence Aerospace (1/3).2011 . Marketing.

Group B 3.Case Study .Corporate Strategy 15 . Organizational Structure 28.2011 ETHZ .11.

Case Study .Corporate Strategy 16 .Group B 3. Organizational Structure 28.11.2011 ETHZ .

Group B 3.2011 ETHZ . acquiring a messy.Where would you put headquarters? • Bombardier Cooperate HQ: Montreal.Case Study . but profitable patchworked Adtranz Bombardier has strong management and business excellence capabilities Legal location: EU is tougher on legal issues (monopoly) o o • Transportation Center of Excellence: Berlin. Organizational Structure .Corporate Strategy 17 . CA o o Bombardier is acquiring (purchasing and absorbing) Adtranz Bombardier is solid company. Germany (Adtranz-HQ) o o o Consolidation of management for Transportation Group in Germany Most facilities and sites are in Germany Europe is biggest and very (country-) segmented market 28.11.

11.Group B Agenda 28.2011 ETHZ .Corporate Strategy 18 .Case Study .

Case Study .Group B 4.Corporate Strategy 19 . Challenges (and Opportunities) after Acquisition Strengths • Reduced economic risk through economies of scope • Management Skills (M&A) • Increased +complementary product portfolio + technology • Increased market share / global reach • 2.11.7 billion $ backlog maintenance + services • Density of service facilities increases in Europe Weaknesses • • Quality issues of Adtranz-products Limited presence in emerging markets 28.2011 ETHZ .

Corporate Strategy 20 . Challenges (and Opportunities) after Acquisition Opportunities Threats • Trend towards privatization Leasing contracts (Financing) Delayed investments Dysfunctional practices • Redundant functions • Cultural and organisational differences • A small company (BT) takes over a big one (Adtranz) Management Capacity/Skills • Development of European Highspeed train infrastructure • Increase productivity + quality on Adtranz sites • Economies of scale • Expand in emerging markets 28.2011 ETHZ .Case Study .Group B 4.11.

Corporate Strategy 21 .2011 ETHZ . Proposals to address Challenges 28.11.Case Study .Group B 4.

Corporate Strategy 22 .Case Study .2011 ETHZ .Group B Agenda 28.11.

7bn) Revenue Transportation 28.Group B 5.11.2011 ETHZ . Bombardier today Core Business Revenue by Region (2011:$ 17.Case Study .Corporate Strategy 23 .

Group B 6.2011 ETHZ .Corporate Strategy 24 . Q & A Thank you! 28.11.Case Study .