• The astute global competitor will exploit the situation, however, by building a specialized component

manufacturing facility in an Newly Industrialized Countries (NIC) which will become an integral part of a
global sourcing network. The company exports output of the specialized facility to offset importing
complementary components. Final assembly for the domestic and smaller, neighboring markets can be done
locally. (Having dual sources for key items can minimize the risk of disruption to the global sourcing
network.)
• A good illustration of this strategy is Siemens’s circuit breaker operation in Brazil. When the company
outgrew its West German capacity for some key components, it seized the opportunity presented by
Brazilian authorities seeking capital investments in the heavy electrical equipment industry. Siemens now
builds a large portion of its common components there, swaps them for other components made in Europe,
and is the lowest-cost and leading supplier of finished product in Brazil.
• https://hbr.org/1982/09/how-global-companies-win-out
• A global player should decide against which of its major competitors it must succeed first
in order to generate broad-based success in the future. Caterpillar located in the Far East
not only to source products locally but also to track Komatsu. (Cat increasingly sources
product and manufacturing technology from Japan.) Ericsson’s radical departure in
technology was aimed squarely at ITT and Siemens, whose large original market shares
would ordinarily have given them an advantage in the smaller European and African
markets.
• Hay Group has helped Siemens focus on three core sectors—energy, healthcare and industry—and has
introduced CEOs across each division and business unit.
• Siemens AG needed to transform its business along sector lines. Instead of multiple regional and country
operations, each run by a commercial and technical head, the Siemens structure needed to be better suited
to its global market.
• Siemens wanted ‘organizational clarity’; in particular a clear picture of the different job values of its top
management. Pivotal to the restructure of the organization, such clarity gave the company’s leaders the
insights they needed to take on revised roles and responsibilities. Hay Group also designed a new job
grading scheme that Siemens calls ‘global position levels’—and evaluated and assigned the top management
positions to the respective position levels globally.
http://www.economist.com/node/16990709

• For decades Siemens was the problem child of European heavy industry, lurching from profit to
loss almost quarter by quarter as big infrastructure projects went wrong or spending spiraled out
of control. Even when it made a profit, its margins were too thin to cover its cost of capital—in
the early 2000s Siemens's margins were routinely half those of its main competitors
• One reason for this was Siemens's inability to decide whether to concentrate on making the guts
of modern industrial societies, big bits of engineering such as trains, turbines and transformers, or
whether it also wanted to make clever, zippy things such as mobile phones and computer chips.
Another was an unhealthy reliance on its home market, which in the early 1990s still accounted
for almost half of its sales. Its biggest clients were often tied to the state and preferred to buy
German. This economic nationalism did Siemens little good: it grew fat and lazy and struggled to
compete abroad. “It was a technologically obsessed company that didn't care much about
shareholders or return on capital,” says Mr Prozesky. “It was interested in engineering for
engineering's sake.”
• Underlying all this, Siemens was badly managed for a long time. Just how badly became clear between 2006 and
2008 when it was embroiled in a mammoth bribery scandal. By the end of it Siemens had paid $1.6 billion in fines
for bribing officials and politicians around the world. Investigators found that paying backhanders was so ingrained
that the company even had dedicated “cash desks” where employees could fill suitcases with banknotes that would
be used to secure contracts.
A re-engineering job
• Within a few months he had completely reshaped the company's management structure. “One of my first
sentences in the company was speed, speed, speed,” Mr Löscher says, summing up a pace of change that might
have been impossible to ram through without the bribery scandal.
• Half of the old operational management team was moved out. The company's 11 divisions were reduced to three
“sectors”. And in place of management by committee and consensus, Mr Löscher gave each of his sectoral heads
full responsibility for their businesses. “It is about aligning accountability and responsibility so that at the end of the
day I look into your eyes and say: you are responsible,” he says.
• Right at the start, Mr Löscher made another big change. He made deep cuts in the group's portfolio of businesses,
to simplify it and to get it out of markets, such as consumer electronics, in which competitors were running rings
around it. Within weeks of taking over he had made two big deals, selling VDO, an automotive-electronics business,
for €11.4 billion and buying Dade Behring, a medical-diagnostics company, for €5.1 billion.
• The main purpose of all this has been to build Siemens's presence in technically advanced infrastructure
such as energy and transport, where the barriers to entry are high, or in areas such as health care and
energy controls for buildings, where the company can bundle products and services together. This may
sound like the tired and unconvincing justifications that conglomerates, including Siemens, have long trotted
out for why they have disparate businesses. Yet Siemens does seem to be winning business with bundled
offers. It can, for example, audit a company's energy use and suggest improvements that will then pay for
themselves out of savings. Many rivals already do this. But few offer to finance the capital spending and
guarantee the energy savings, as Siemens does.
• As American and European electricity generators switch from coal to cleaner-burning gas, the market for
large gas turbines is growing fast. For years Siemens was unable to increase its share much beyond one-
third. But in the past few years Siemens has taken the lead with a new family of turbine that is bigger and
more efficient than anything else on offer. It can extract more than 60% of the energy from the natural gas it
burns; earlier generations seldom got above the mid-50s. Even a few percentage points matter, because fuel
accounts for around three-quarters of the lifetime cost of a turbine. For a big turbine, a utility will typically
reckon that a gain of two percentage points will save more than €50m-worth of fuel.
• In other fields Siemens's progress has been equally dramatic. One is wind energy, a market that analysts at HSBC
think will grow by 5.5% a year between 2009 and 2020. In 2005 Siemens had only 5% of the global market. Instead
of competing head-on with the leaders, Siemens put its efforts into developing wind turbines that could be
anchored at sea, where winds are stronger but conditions are more testing—and where HSBC forecasts growth of
29% a year. It is now the leading supplier of offshore turbines, boasting well over half of that segment, and its share
of the total market has increased
• In coming years, however, Siemens's biggest advantage in the energy business will lie not in individual products but
in having a range of complementary items that will allow it to bid for almost all parts of the greening of electricity
production. One technology is High Voltage Direct Current (HVDC), which is little known but is likely to become the
core of what some call green-power superhighways, because it allows huge amounts of electricity to be sent a long
way down thinnish cables.
• In a typical electricity transmission line, as much as 10% of the power will be lost over a distance of 800-1,000km.
This limits electricity trading and allows prices to vary a lot, even between neighboring European countries or
American states. HVDC cables can transmit electricity over similar distances with losses as low as 2-3%, making it
easier to generate electricity where it is cheapest and send it to where it is needed. In China and India, for instance,
a string of new hydroelectric and coal-fired power plants are being built deep in the interior and connected to
faraway coastal cities. This technology has been around for a while—in the 1950s it was used to connect Gotland to
mainland Sweden—but in recent years the infrastructure it needs has become smaller, cheaper and more reliable.
• The Cost Advantage: Lower Operating Costs, Business Process Outsourcing, Will the Cost Gap
Persist, Lower Capital Investment Requirements, The Hidden Cost of RDE Operations
• The Market Access Advantage
• The Capabilities Advantage
• The Outsourcing Decision
• International Market Opportunities: Exporting, Contracting Strategic Alliances, JV, Choosing Mode
of Entry, Multidomestic vs Global Strategies
• International Strategy and Value Chain