Siemens Company Analysis
Siemens Company Analysis Free Essay
Company Profile
The chosen multinational company is Siemens in Bangladesh. It is a company that operates globally in various industries such as electronics and electrical engineering, energy, and healthcare sectors. Through its global operation, Siemens has been very successful with its 336,000 employees. Consequently, these numerous employees are helping the company in developing and manufacturing products in various industries. Its operation has stood the test of time. The 160 years of the company’s operation have been founded on technological excellence, innovation, quality, reliability, and internationality (Siemens.com).
Further proof of the profitability of Siemens is its financial statements from 2012 to 2013. As a fact, its revenues in Bangladesh have reached almost 170 million in the abovementioned fiscal years. In Bangladesh alone, the company has 106 employees to support its operation. Siemens has been engaging in various business activities since 1956. The products of the company had been well received by consumers for many years, particularly in energy and healthcare (Siemens.com).
PESTEL Analysis
To fully comprehend the global performance of Siemens, PESTEL analysis is very applicable for such purposes. In PESTEL analysis, the different macro aspects of the business environment of a company are the focus of the investigation. PESTEL analysis is a tool for strategic planning, especially in determining the competitiveness of the macro aspects where the company operates. The acronyms are translated into political, economic, social, technological, environmental, and legal aspects that affect business performance (Armstrong & Kotler, 2009).
In terms of the political aspect, Bangladesh adheres to a parliamentary democracy since 1990. Along with its democratic framework, it has a separate judiciary and an active civil society. However, despite its conversion into democracy, experts say that Bangladesh is still partially free. Though the government is already espousing freedom of expression and political opposition, citizens and media practitioners are being coerced or pressured by religious groups. This is because some groups that are rooted in radical Islamism seriously oppose the principles of democracy and equate it with heresy (Stahl).
As a result, Bangladesh has experienced instability in its political aspect since its democratic era. The Bangladeshi High Court had ruled on several suspensions of elections because of anomalies. The increased number of protests against election fraud in 2007 has resulted in the arrests of almost 35,000 Bangladeshis. The main conflict has been attributed to the resistance of the radical Muslim groups which prevent the emergence of Bangladesh as one of the world’s largest democratic countries (Stahl).
With the analysis above, it would be speculated that Bangladesh may pose threats to the operation of Siemens. The political instability that the country is encountering may disrupt the business activities of the subject company. It is highly essential that Siemens would be prepared for any contingency in case the political unrest would escalate to an alarming level.
Regarding the economic aspect, Bangladesh has been gradually improving. The transformation of the political aspect into a democratic system has allowed the launching of various economic policies that adhere to globalization and free trade. For one thing, the government had successfully reduced its deficits since the 1990s. The economic reforms included the opening of the country for foreign investors and adherence to the export/import scheme that contributed to the positive performance of the economy in recent years. The import and export of products have increased due to the said reforms. These changes in the economic policies have led to an increase in GDP in the following years (Mahmud et al, 2008).
The data above suggests that the economic aspect of Bangladesh may be slightly favorable to Siemens because of its improved performance. However, the politics and economy go along with each other. This would imply that the economic performance of Bangladesh can be adversely affected if the political instability would persist in the long run.
In terms of its social aspect, Bangladesh had advocated the Hindu caste system before the changes in the 1980s. Before, the Hindu caste system had divided people from different social classes by their religious beliefs. When the democratic system was introduced, the Hindu caste system was altered into a more fluid and loose system. The people of Bangladesh are highly influenced by the Hindu and Muslim cultures. Though that is the case, the enmeshed cultures of the two religions do not provide any contradictions among the Bangladesh people. Both religious beliefs are respected in Bangladesh society, which contributes to its growth in its own culture as a nation (Mahmud et al., 2008).
With the combination of Hindu and Muslim cultures, the Bangladeshi people are known for their traditional values. They greatly value their kinship ties and their families are given importance more than anything else. One may say that Bangladesh people are collectivist because of their Hindu roots. This would imply that they prioritize group interest rather than self-interest in everything that they do. Moreover, their traditional values are influential in patronizing their own culture more than the colonial culture. Thus, foreign products entering Bangladesh would require effective marketing strategies since consumers tend to patronize local products.
In terms of technology, Bangladesh is slowly acquiring new physical infrastructures in its effort to fully develop its country. Siemens would gain from this policy direction of the country because the company has the necessary resources to support the energy resource and communication infrastructures of Bangladesh.
When it comes to the environmental aspect, Bangladesh is an advocate of environmental principles because of its Hindu culture. The Hindu culture dictates that the natural environment along with the different species should be taken care of because of the spirits that reside in them. Their religious beliefs which are founded on the idea of reincarnation and Karma contribute to preserving their environment.
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Lastly, the legal aspect of Bangladesh is in the process of transitioning from the traditional type into a modern and constitutional one. The shift of the political system into a democratic one has led to the modification as well of the legal system of the country. In this context, Bangladesh has yet to achieve certain stability in its legal framework that may pose certain threats to multinational companies.
Porter’s Five Forces Analysis
Porter’s five forces analysis is helpful in the level of competitiveness of the industry where Siemens is operating. The analytical tool examines the factors that are relevant to the business activities of Siemens. These factors are industry suppliers, buyers, potential new entrants, substitute products, and competition among existing firms (Armstrong & Kotler 2009).
Siemens has adequate resources for its operation due to its very wide network of industry suppliers, especially in Bangladesh. The company has strong ties with the Bangladesh government and other private companies through the construction of various significant projects such as power plants, hotels, and others. Specifically, Siemens has the support of Baraka Potenga Power Plant Ltd., in terms of the construction of a power plant in Chittagong. In addition, the company has contracted with the Power Grid Company of Bangladesh. This indicates that Siemens can survive any challenges that it may encounter because of the support of large private companies and the government of Bangladesh.
On the part of the buyers, the purchasing power of this sector is relatively low in Bangladesh, because of the few competitors in the operation of power plants. The buyers are not capable of dictating the prices because of the oligarchic structure of competition in the Bangladesh economy. Consequently, the entry of new competitors is as well quite low because Siemens and other large companies dominate the market. The health sector, energy sector, and communication sector require a large amount of capital, which hinders the entrance of new competitors. The potential for substitutes in the energy sector is difficult to attain because of the said market structure. With the existing system of energy supply, Siemens is ahead of its competitors because of its strong connection with the government.
Country Analysis
Bangladesh is gradually becoming a competitive economic market in Asia due to its political and economic reforms in recent years. The country has a moderate score in economic freedom, 54.1 to be exact. It is already the 131st freest in the 2014 Index. The improvement is reflected in the increase of 1.5 points as compared with its last year’s score. This is a good sign because economic freedom would mean more freedom for businesses and buyers in their transactions in the market (Heritage.org, 2014).
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Unfortunately, Bangladesh’s political system which is plagued with corruption tends to hinder economic development. Corruption is manifested through bribery and off-the-record payment schemes in government agencies through procurement, taxation, and customs collection. Therefore, it has decreased the national income per year. To be succinct, the freedom from corruption rate is quite low in Bangladesh which adversely affects the economy (Heritage.org, 2014).
Thus, Bangladesh is still in the process of becoming competitive with some serious problems in the political aspects that have negative impacts on the economy. The level of competitiveness of a country is usually observed in how the government manages business transactions. However, as analyzed above, though the country obtains a moderate rate of economic freedom, the potential for corruption is quite high. This data would suggest that there is a serious problem in the level of competitiveness of the country since governmental structure directly affects business transactions.
Conclusion and Recommendations
Coming to a foregone conclusion, Siemens has enormous potential for financial growth in Bangladesh in the next few years. As noted above, Siemens has sufficient resources to continue its competitiveness in the said country because of its wide network of suppliers. Siemens has been operating in the said country for many years now, which is the basis of its strong ties with the government and other private entities.
Moreover, Siemens is in an industry in which high capital investment is necessary. The energy sector, in particular, could not be penetrated immediately by any new players because of the said reason. For that matter, the purchasing power of the buyers is also low, which contributes to the financial growth of Siemens in the energy sector.
However, Siemens may encounter certain problems in the macro aspects of Bangladesh. One of the main problems of the country in Bangladesh is political instability. The country is still in the learning process when it comes to implementing democratic policies. This is why political unrest is prevalent and may negatively affect the operation of Siemens.
As part of the recommendations, Siemens should maintain high integrity when it comes to making transactions with the government. Though, as mentioned, corruption is rampant in the public sector, Siemens has to abide by the highest ethical standards in conducting its business activities.
In doing so, Siemens has to regularly conduct seminars and training for its employees and higher officials which relate to business ethics and leadership qualities. Every employee of Siemens would maintain their moral obligation toward the public, not only to the company. Seminars and training programs would educate employees in performing their duties by the highest ethical standards to resist the existing malpractices in some government agencies in Bangladesh.
Lastly, Siemens has to formulate and implement policies that would discipline any of its employees who would participate in any corrupt practices in the country. The disciplinary mechanism of the company must be strict regarding any actions that would violate the ethical standards of the company to mitigate the possibility of corruption.
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