Coporate level strategy focuses on two important interelated issues;
· What types of businesses is the company interested in competing in,
· How best can the corporation manage such competitions in a synergistic approach to optimise value. (Teece, 2010).
The need to diversify is the major determinant in which business to get involved in as they are related through ability to leverage core competencies and shared activities, pooling negotiation power, vertically integrating at the corporate trees. Thus the two ways of diversifying are by mergers and acquisitions. (Teece, 2010).
In other to meet core competency criterial for business value creations, the following must be met.
· The core competencies should improve the company’s competitive advantage by creating and increasing customer value.
· The different businesses embeded in the corporation must be similar in at least one way that relates to the core competencies.
· The core competencies must also be difficult toduplicate by their competitors. (Teece, 2010).
Having stated all these, Siemens as a global company is active in several economies that are varied in regards to growth rate. Thus many uncertainties and doubts arise from time to time. (Siemens.com, 2018).
Issues such as the risks of customers delaying the conversion of recognised orders into revenue or of them cancelling recognised orders, of prices declining as a result of adverse market conditions by more than is currently anticipated by Siemens’ management or of functional costs increasing in anticipation of growth that is not realized as expected.
Other factors that may cause Siemens’ results to deviate from expectations include developments in the financial markets, including fluctuations in interest and exchange rates (in particular in relation to the U.S. dollar and the currencies of emerging markets such as China, India and Brazil), in commodity and equity prices, in debt prices (credit spreads) and in the value of financial assets generally. (Siemens.com, 2018).
Lastly, a decline in the conditions for the credit business, uncertainty related to the subprime, financial market and liquidity crises, or fluctuations in the future financial performance of the major industries served by Siemens may have unexpected effects on Siemens’ results. (Siemens.com, 2018).
Furthermore, Siemens faces risks and uncertainties in connection with: disposing of business activities, certain strategic reorientation measures, the performance of its equity interests and strategic alliances, the challenge of integrating major acquisitions, implementing joint ventures and other significant portfolio measures.
The introduction of competing products or technologies by other companies or market entries by new competitors, changing competitive dynamics (particularly in developing markets), the risk that new products or services will not be accepted by customers targeted by Siemens; changes in business strategy, the interruption of our supply chain, including the inability of third parties to deliver parts, components and services on time resulting for example from natural disasters. (Siemens.com, 2018).
They are constantly minimizing the risk of being involved in investigations that are defaming. They are also faced with other trying to cut any form of legal proceedings and actions resulting from the findings of, or related to the subject matter of, such investigations; the potential impact of such investigations and proceedings on Siemens’ business, including its relationships with governments and other customers; the potential impact of such matters on Siemens’ financial statements, and various other factors. (Siemens.com, 2018).
As with every successful strategy, it must fit with the business, Siemens had to make sure they were flexible as shown through their relatively broad portfolio.
For example, Siemens was not overly affected by the financial crisis, whereas GE suffered from its exposure to the financial industry – usually the main driver of its strong profitability. Kaeser is keeping the company fairly diversified but has also taken additional steps. (The conversation, 2018).
Most importantly they have structurally separated the medical equipment business. This allows the business to adjust better to its markets. It also allows the medical equipment business to go to the stock market to finance big investments without tapping into Siemens’ coffers and if necessary the business can be sold entirely. (The conversation, 2018).
Another pragmatic decision has been a joint venture with Mitsubishi-Hitachi Heavy Machinery to create a global supplier of metals technologies. This allows Siemens to exit more easily at some point in the future. At the same time, they can benefit from a promising business at arms-length just as they did with BSH for almost 50 years.
Overall Siemens is on a good track. Its strategy implementation is a step-by-step process where executives realise that consistency matters. Often companies fail because they try to do too much and do not put sufficient energy into sorting out the details. Siemens has historically had the patience to get things right and now the stock market is rewarding this. (The conversation, 2018).
Resolution of the tension:
Siemens business level strategy revolves around innovation, this means implementing and generate ideas that fetch money/income. These ideas can range from products, solutions and services that serves as a target for the company and its conterparts all over the world. (next47 – Home, 2018)