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ROBERT BOSCH POWER TOOLS: REGIONAL HEADQUARTERS

STRUCTURE FOR EASTERN EUROPE AND THE MIDDLE EAST (A)

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Jan Schmitt and Professor Phillip C. Nell wrote this case solely to provide material for class discussion. The authors do not intend to
illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other
identifying information to protect confidentiality.

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University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Our goal is to publish
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Copyright © 2021, Ivey Business School Foundation Version: 2021-09-21

In April 2015, Maria Anderson and Christian Meyer returned to their office in Stuttgart, Germany, after a
business trip to Warsaw, Poland, home to one of the biggest sales offices of Robert Bosch GmbH (Bosch) in
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the Eastern Europe and Middle East (EE-ME) region. Both managers worked for Bosch’s Power Tools (PT)
division. As the marketing director for the EE-ME region, Anderson worked closely with Meyer, who was
vice-president of regional sales. Recently, both had witnessed rising tensions between the region’s
headquarters (RHQ) in Stuttgart, where Bosch’s corporate headquarters (CHQ) and its EE-ME PT subsidiaries
were located. The tensions included complaints from the subsidiaries about slow decision-making, a lack of
efficiency, and a limited understanding of customer needs. These tensions had found their way onto the agenda
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of top management, who had asked Anderson and Meyer to come up with potential solutions.

Placing her suitcase next to her desk, Anderson mumbled,

It is true that the new Blue Emerging Markets [BE] business unit [an independent business unit for emerging
markets within the PT division] facilitates daily operations. And of course, business trips like this one help
to get closer to our markets. Yet, sitting here in Stuttgart most of the time limits our understanding of
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customers and market dynamics, and hampers collaboration with our colleagues in the region.

Meyer nodded in agreement, adding, “True, and I think it does slow down decision-making at times. However,
being at the CHQ location in Germany has some advantages as well and gives us better connections to the
executive management team from Bosch.”

Feeling caught between the fronts of the CHQ and the region’s subsidiaries, the two managers realized that
some adaptations were necessary to tackle the rising organizational tensions and to prevent the rapidly
growing competitors from catching up. However, they needed answers to two questions: What changes
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were needed in the RHQ to deal with the issues, and how could Anderson and Meyer potentially reconcile
the needs of both the CHQ and the subsidiaries? The two had been asked to solve the dilemma as soon as
possible⎯and time was running out.

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BOSCH’S BACKGROUND

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Robert Bosch GmbH was a German technology and engineering giant headquartered close to Stuttgart. The
firm was founded in Stuttgart in 1886 by Robert Bosch. Although it was known as an automotive supplier,
Bosch had become a leading Internet of Things (IoT) company, offering innovative solutions for connecting
manufacturing, mobility, smart cities, and homes. To provide its customers with solutions from a single

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source, the firm had developed deep expertise in software, sensor technology, and services, as well as its
own IoT cloud. Bosch’s strategic objective was “to deliver innovations for a connected life.” Since 1964,
its majority shareholder was a charitable foundation, the Robert Bosch Stiftung GmbH.

The company operated across four business sectors. Bosch’s Mobility Solutions sector was one of the
world’s largest suppliers of mobility solutions, including mobility platforms for personalized mobility
solutions (e.g., via applications [apps]), driver assistance systems for self-driving vehicles, and electrified

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mobility solutions for powertrain systems. Furthermore, with its Industrial Technology sector, the company
was the leader in drive and control technology, packaging, and process technology. Bosch was also one of
the leading manufacturers of security and communication technology as well as a leading manufacturer of
energy-efficient heating products and hot-water solutions. These technologies and solutions were jointly
managed in Bosch’s Energy and Building Technology sector. Lastly, the firm was a leading supplier of
power tools and accessories, as well as household appliances, through its Consumer Goods sector.

The Mobility Solutions business sector accounted for 59 per cent of total group sales, while the other three
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sectors made up the remaining 41 per cent (see Exhibit 1).

In 2015, Bosch recorded sales of €70.6 billion1 and earnings before interest and taxes of €4.6 billion. It
operated with approximately 375,000 employees and 440 subsidiaries and regional companies worldwide
and had activities in more than 60 countries (see Exhibits 2, 3, and 4).
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To keep its market leadership position, Bosch had been pursuing a comprehensive organizational
restructuring for the past couple of years. The main objectives of this group-wide agility transformation
project were to foster user-centricity; establish end-to-end entrepreneurial responsibility; and increase its
flexibility, speed, and innovation power. The project was Bosch’s reaction to a changing competitive
landscape with aggressive global peers and ongoing digital transformation.
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POWER TOOLS DIVISION BACKGROUND

Bosch’s PT division belonged to the Consumer Goods business sector (see Exhibit 5). Through the PT
division, Bosch was one of the world’s leading providers of power tools, power tool accessories, and
measuring tools. In 2015, the PT division produced around 55 million power tools⎯more than ever before,
and almost twice as many as 10 years earlier⎯generating about €3.5 billion turnover.

The PT division was divided into six business units: Accessories, BE, Blue Industrialized Markets, Home
and Garden, Measuring Tools, and Rotary Tools.
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1
€ = EUR = euro; US$1 = €0.891 on April 30, 2015.

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POWER TOOLS⎯BLUE EMERGING MARKETS

As one of the six PT business units, BE was established in 2015 to cover 150 emerging market countries in
Asia-Pacific (excluding Japan, Korea, and Oceania), the EE-ME region, Africa, and Latin America. The
overall PT-BE business unit counted more than 400 products in its portfolio that covered all professional
power tools market segments. In 2015, the PT-BE business unit generated sales of approximately €800

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million. Its products were known in the market for their excellence in quality, robustness, and performance.
With its own board of management located in the PT-BE business unit’s global headquarters in Shanghai,
China, the PT-BE business unit had full profit-and-loss responsibility for its business. The business unit’s
global headquarters was mainly responsible for steering the regions, as well as for research and
development, engineering, and manufacturing.

Considering the size and complexity of managing all units across the emerging markets, the PT-BE business

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unit established RHQs across the four regions⎯in Casablanca (Africa), Shanghai (Asia-Pacific), Stuttgart
(the EE-ME region), and Campinas (Latin America)⎯to better manage its business. The PT-BE’s RHQs,
similar to all other RHQs within PT, were primarily responsible for marketing, sales, and operations
management for the entire region. They supported the country subsidiaries, which were primarily
responsible for the commercialization of the products.

The organizational structure of the RHQs was mirrored across the regions. Headed by a regional president,
who reported directly to the PT-BE president in Shanghai, the units had marketing, sales, logistics, finance,
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and project management heads (see Exhibit 5).

The EE-ME region’s RHQ, with its 30 employees, where Anderson and Meyer steered their daily business, was
responsible for a total of 17 subsidiaries with approximately 380 employees, who managed the business in 41
countries. The unit generated sales of €270 million in 2015, which made Bosch the market leader in the region.
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DISCUSSION OF THE CHALLENGES FOR THE EE-ME REGION

Two board members and more than 10 senior managers from across the EE-ME region met at the RHQ in
Stuttgart with Anderson and Meyer to discuss the long-term orientation of the relatively new PT-BE
business unit. Anderson opened the meeting by declaring,
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Despite a successful establishment of the Blue Emerging Market unit in Q1 [the first quarter], there
seem to be some organizational issues around the functioning and value-added of the RHQ. We are
taking these issues seriously. We are gathering today to develop a comprehensive perspective and
better understanding of the positives and the challenges of our current organization. Ideally, we
[will] develop some ideas for improvements.

One board member spoke up, saying, “Thank you for this initiative. The board is aware of some challenges.
Let me also add that we are of course observing a high cost structure at the RHQ here in Germany.
Simultaneously, the business we are steering from Germany does not provide us with high margins, and it
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is difficult to achieve our ambitious sales and profitability growth targets.”

“We have been witnessing this financial situation as well,” Meyer replied, “but despite its high costs,
Germany is offering a great business location for us. We have access to a big talent pool, we are able to
also attract foreign talent to move to Germany, the institutional environment has been very stable over the
last years, Bosch has a very good reputation . . . I could go on with a long list of favourable location factors.”

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Omar Ahmad, sales director for the Middle East (Dubai), interrupted:

Yes, those points might be valid, but how do we in the region benefit from it? Currently, I do not
see any benefits for us from you being located in Germany. To be honest, we struggle a lot with
the large distance between us and Stuttgart. Often, we hear from the managers in the RHQ that
travelling to our countries is strenuous and requires a lot of planning with visa applications and so

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on. Additionally, it seems as though the managers in the RHQ do not really consider the
peculiarities of the region. Some requirements and procedures suggested by the RHQ are simply
not suitable for us in the Middle East. Customers there are very different from those in Germany
with different needs, behaviours, and preferences.

Andrey Smirnov, key account director for Russia, agreed:

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Sorry to be so blunt, but I also feel misunderstood by the RHQ at times. You do not seem to really
understand our local business. My experienced colleagues in the region know much more about the
market in Eastern Europe and Middle East than my colleagues in the RHQ. Most of you in the RHQ
do not have much experience in the region, and my feeling is that there are lots of
misunderstandings. Having said that, I do not think that we will be soon able to pursue a direct
sales approach [one initiative of the group-wide agility transformation project] to circumvent
intermediaries. The regional management needs much more profound market insights to address
customer needs in an effective and speedy way.
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A second board member replied, “These issues are worrying, especially given that a key aspect of Bosch’s
strategy is to be close to the customer. We need to better align with the group’s strategy.” Anderson responded,
“Christian and I share your concerns and we are fully aware of these challenges. At the same time, our colleagues
at the RHQ in Stuttgart have also shared their frustrations that they struggle to gather adequate customer feedback
from the countries. This makes it very hard for them to understand and then to address local needs.”
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Krystof Nowak, sales director for Poland, offered a first solution, saying,

So, if I understood everything correctly, most subsidiary managers, including myself, are unhappy
with the support from the RHQ. The RHQ managers are not able to collect enough market insights
from the region, but at the same time, most of our subsidiaries are performing quite well. We have
been generating great results in our key markets of Russia, Turkey, and Poland throughout the last
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years. So, why is the executive management team not giving more autonomy to the subsidiaries
that are doing a great job, anyway, and reducing the power and size of the RHQ?

The other subsidiary managers, especially Metin Yilmaz, sales director for Turkey, supported Nowak’s
suggestion. Yilmaz said,

You are right, Krystof. I perceive that the collaboration between the regional management, country
managers, and subsidiary employees is sometimes not as smooth as it should be. I often have to
wait too long to receive a “go” from the RHQ for several requests and cannot act as timely as the
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market would require. How can we ever become an agile organization if our decision processes are
so bureaucratic? I would highly appreciate if we had more freedom in our countries.

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Anderson pointed out,

But we still need centralized steering. For example, we need to align on our general go-to-market
approach; otherwise, we have frictions and issues such as parallel trade. This can only be managed
by an RHQ team. Additionally, we always push for more synergies between the countries, and we
heard from many of you that you benefited a lot from shared experiences from sister units in other

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countries. You would not have that without a strong RHQ.

A board member interjected: “Are we not sending RHQ managers out to serve in the region for some
years?” He pointed out, “As a group, we aim at hiring, retaining, and developing local talents in the region.”
Meyer agreed, but added, “However, we often find it difficult to relocate managers after they have been
trained and developed in the RHQ. Family life, salary levels, and career prospects are often mentioned in
this regard. Most simply, they do not want to move back to the region.”

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Celina Nassar, marketing manager for the Middle East, joined the discussion, saying,

I am a bit frustrated with these discussions. The RHQ wants to be close to the CHQ, but some
colleagues do not want to move back to the region. We often feel neglected by the regional
management, and we have the impression that the RHQ gives more attention to certain units than
to others. We definitely need to manage our resource allocation in a better way. We should all strive
towards the same goal instead of being too selfish.
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There was silence for some time before Klaudia Tomková from Slovakia concluded, “I fully share the
frustrations of my colleagues. But I do not see a clear way out. The only thing that I know with confidence
is that if we continue in this way, we will soon lose not only our market leader position in the region, but
also the motivation of our employees, both in the subsidiaries and in the RHQ.”
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The meeting went on for a while. At the end, Anderson and Meyer were tasked with developing ideas for
solutions before the next meeting. Of course, no single organization was perfect, but what could alleviate
some of Bosch’s issues while enabling the organization to benefit from a value-adding RHQ?
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EXHIBIT 1: BOSCH’S SALES REVENUE DEVELOPMENT, PER BUSINESS SECTOR

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45
41.7
40

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35 33.3

30

25
Sales Revenue
[EUR billion]

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20
17.1 2014

15 2015

10
6.7 6.6
4.6 5.1 4.2
5
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0
Mobility Industrial Energy and Consumer
Solutions Technology Building Goods
Technology
The Bosch Group’s Business Sectors
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Note: EUR = € = euro; US$1 = €0.891 on April 30, 2015; Total for 2014 = €49.0 billion; Total for 2015 = €70.6 billion.
Source: Created by the authors using data from Robert Bosch Gmbh, Annual Report 2015, 106, March 15, 2016, accessed
March 4, 2021, https://assets.bosch.com/media/en/global/bosch_group/our_figures/publication_archive/pdf_1/GB2015.pdf.
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EXHIBIT 2: BOSCH’S SALES REVENUE DEVELOPMENT

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80

70.6
70

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60

51.5
49.0
50 46.1
44.7

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Sales Revenue
40
[EUR billion]

30

20
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10

0
2011 2012 2013 2014 2015
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Note: EUR = € = euro; US$1 = €0.891 on April 30, 2015; Compound annual growth rate = 8.2%.
Source: Created by the authors using data from Robert Bosch Gmbh, Annual Report 2015, 103, March 15, 2016, accessed
March 4, 2021, https://assets.bosch.com/media/en/global/bosch_group/our_figures/publication_archive/pdf_1/GB2015.pdf.
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EXHIBIT 3: BOSCH’S EBIT DEVELOPMENT

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5
4.6
4.5

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4

3.5
3.0
3 2.8
2.7

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EBIT
2.5
[EUR billion]
2.1
2

1.5
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1

0.5

0
2011 2012 2013 2014 2015
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Note: EBIT = earnings before interest and taxes; EUR = € = euro; US$1 = €0.891 on April 30, 2015; Compound annual growth
rate = 14.1%.
Source: Created by the authors using data from Robert Bosch Gmbh, Annual Report 2015, 103, March 15, 2016, accessed
March 4, 2021, https://assets.bosch.com/media/en/global/bosch_group/our_figures/publication_archive/pdf_1/GB2015.pdf.
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EXHIBIT 4: BOSCH’S EMPLOYEES IN 2015

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The Bosch Group Employees by Region

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28%
35%
Germany
Europe (excl. Germany)

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The Americas
Asia Pacific
11%

26%
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The Bosch Group Employees by Business Sector
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4%

20% Mobility Solutions

Industrial Technology
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Energy & Building

Technology
7%
58% Consumer Goods

Other Activities
11%
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Note: Total employees = 374,778.

Source: Created by the authors using data from Robert Bosch Gmbh, Annual Report 2015, 107, March 15, 2016, accessed
March 4, 2021, https://assets.bosch.com/media/en/global/bosch_group/our_figures/publication_archive/pdf_1/GB2015.pdf.

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EXHIBIT 5: ORGANIZATIONAL STRUCTURE OF BOSCH’S CONSUMER GOODS BUSINESS

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SECTOR

Bosch Group

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Energy &
Mobility Industrial Consumer
Building
Solutions Technology Goods
Technology

Bosch Siemens Hausgeräte

Power Tools
Home Appliances

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AC BE BI HG MT RT

Africa Asia Pacific EE-ME Latin America

Logistics Finance Project

Marketing VP Sales VP
Manager Manager Manager
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Note: AC = Accessories; BE = Blue Emerging Markets; BI = Blue Industrialized Markets; HG = Home and Garden; MT = Measuring
Tools; RT = Rotary Tools; EE-ME = Eastern Europe and Middle East region; VP = vice-president.
Source: Created by the authors using data from company files and Robert Bosch Gmbh, Annual Report 2015, 83, March 15, 2016,
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accessed March 4, 2021, https://assets.bosch.com/media/en/global/bosch_group/our_figures/publication_archive/pdf_1/GB2015.pdf.

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