Introduction To Global Business Strategy
Global business strategy is acts as a strategic guide which provides direction to a business enterprise. Basically three areas are covered by this such as global, multinational along with international strategies. It proves beneficial at the time when organization is going through strong pressures in terms of cost reduction, globalization and so on. Here, the present study revolves around the global business strategy of Siemens AG (Head and Sorensen, 2006). It is a global electronics and electrics business which is located in UK with employee base of around 450,000 people (Lynch, 2013).
The business enterprise has over 100 offices as well as factories in which around 5000 workers are employed in the process of manufacturing. It is a type of multi sector business which deals in a range of sectors such as ICT, health care, transport, energy and so on (Purdie, 2008). In the present report international business environment is going to be discussed along with the analysis of external and internal business environment. In addition to this, benefits, challenges and opportunities associated with globalization will be studied in the context of Siemens AG. The statement will be followed by corporate social responsibilities adopted by organization and focus will be laid on moral and ethical issues which are being faced by company.
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There are ranges of techniques which are available which can be adopted by Siemens AG in order to analyze the business environment such as PESTLE analysis, Porters five force model and so on. In PESTLE analysis political, economical, social, technological, legal as well as environmental factors are considered which deliver knowledge and understanding of factors in which organization is operating (Hennessey and Jeannet, 2005). On the other hand, Porters five force analysis is all about bargaining power of customers and suppliers, threat of substitute and new entrant along with intensity of rivalry with another business enterprise. With the help of this Siemens AG is able to determine the environment in which they will operate (Akan and et.al., 2006).
Micro environment: These are the factors and elements which covers under the immediate area of organization that highly affects performance as well as decision making freedom of company. In order to carry out this SWOT of Siemens can be performed (Antony, 2012).
Macro environment: These are the external and uncontrollable factors that can impact on performance and strategies of business enterprise. Macro environment of Siemens AG can be discussed with the help of PESTLE analysis.
Political factors: Siemens AG has to comply with political rules and regulations of the country in which it is carrying out its functions. Various acts such as Sales of Goods Act and Consumer Protection Act have to follow by company while operating in the market of UK. In the similar manner, as a multinational company they have to follow fiscal policies which is being enforced by ruling bodies of varied countries so that they can carry out their work effectively and efficiently (Paul, 2011).
Economic factors: Business enterprise is highly exposed to fluctuations which takes place in exchange rate. By means of prevailing economic downturn it has lead to decrease in capital expenditures from clients which has negatively affected working of Siemens AG (Karaszewski, 2010).
Social factors: These are concerned with lifestyle pattern and needs and wants of potential clientele. This has affected the working up to a certain extent. Due to any kind of changes in living standard or taste or preference of buyers functioning of business enterprise can highly get affected. So management has to produce goods and services accordingly so that maximum satisfaction can be provided to service users (Potluri and Hawariat, 2010).
Technological factors: They have to comply with technical knowhow and expertise while designing their products because so that they will be able to gain competitive advantage over their rivals in long run (Purdie, 2008). Some of these aspects include automation, research and development, technological awareness along with market process.
Legal factors: Organization such as Siemens AG has to follow each and every rules and regulation of the nation so that they cannot be held liable for any kind of misconduct or mishap (Head and Sorensen, 2006). This factor takes the account of every single angle and chart in light of various legislations such as customer law, safety standards, labor law and so on.
Environmental factors: They are trying really hard for safeguarding the environment in which they are functioning by realizing their corporate social responsibility. Firm has adopted the concept of go green so that they can provide assistance to society for its further growth and development (Cohen, 2010).
Foreign exchange: Every single nation has different currency rate which directly and indirectly affects operations of business. They have to face various problems and issues while dealing in varied nations (Daza, 2011).
Global factors: Marketing, sales and technical skills are required to enhance the productivity and profitability of organization which varies as per changes in market, due to which impact has been led on functioning of Siemens AG (Hurn, 2008).
Cultural factors: Culture and beliefs of each country is different from other, so in order to maintain their market presence they have to change their policies accordingly (Ferreira, 2012). Language is also one of the factor which can affect international business environment of Siemens AG due to difference in language of people employed due to which attainment of organizational aims and objectives can become quite difficult (Allio, 2005).
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Extent of globalization on Siemens is quite broad and there are a number of impacts that globalization has on Siemens. These are the impacts that can have both positive and negative impacts on business of the organization. These impacts are discussed as under:
Expanded Markets – One of the impacts of globalization from business perspective is expanded markets. This means that previously when business dealt with a number of local markets and companies, now it can start to sell its goods and services to other countries as well (Purdie, 2008). This will provide company with greater market share and more consumers can be acquired through globalization. The greater market share also bring along greater sales and better business revenues which can help organization go for expansions locally as well as globally (Hennessey and Jeannet, 2005).
Cheaper Resources – One of the impacts of globalization will bring cheaper resources to Siemens and this will help company control or reduce its cost of production of goods and services. When company has to pay more wages in the UK, it does not have to pay the same while operating in another country of European Union or any other region beyond the EU. This means firm can have advantages of cheaper labor in international business. Also firm can have raw materials on cheaper rates which it gets on higher rates in the UK (Paul, 2011). This is also one of the advantages company can acquire while operating on international basis.
International Development – International development is another impact that Siemens can have while operating on international basis. International marketing is one aspect through which Siemens can establish its brand identity in new and potential markets. In this way, firm can have better brand recognition throughout industry in the regions where there are no limits. This will only help organization develop its brand on global basis (Purdie, 2008).
Cultural Exchange – Cultural exchange is one of the significant impacts of globalization which involves exchange of culture between the company and the host country where company is operating currently. The exchange of culture will bring along a number of more opportunities for penetrating markets and establish brand identity which is appealing to new markets as well as customers (Akan and et.al., 2006).
Technological Development – Technological development is also a significant impact of globalization on Siemens which can help company improve its business operations as well as communication systems throughout the organization. Technological advancement in a country can be very much beneficial for growth and expansion of Siemens (Marković, 2012).
There are a number of benefits, opportunities as well as challenges arising from globalization for Siemens and they are discussed as under:
Outsourcing – Outsourcing can be considered as one of the benefits of globalization through which Siemens can outsource a number of its operations that are not of much importance to the company. These operations may involve, human resource management, or database management etc. This can help company provide more of its attention towards core activities which are of higher importance (Head and Sorensen, 2006).
Cheap Labor – There are a number of developing countries around the world that provide cheap labor to international companies. Siemens can grab this as a benefit to control its production as well as operations costs to become competitive in the industry (Antony, 2012).
Advance Technology – Globalization is one such factor that brings along an opportunity to grab advancement in technology in developing countries like Brazil, Indonesia, and India etc. Siemens can grab the opportunity to improve its efficiency within its business operations and maintain its cost throughout various business units around the world (Forshaw, 2006).
Global Competition – One of the challenges of globalization to Siemens if increased global competition which brings along a number of more global competitors besides local competitors. This will lead company to reduced market share and more costs for global marketing and distribution top compete well with those of competitors (Wit and Meyer, 2010).
All the above points describe benefits, opportunities and challenges of globalization to Siemens which are to be considered by the company for better insights into global business strategy (Navarro and Martinez, 2009).
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Siemens is a kind of organization which operates on an international divisional structure on global basis. There are various divisions of company such as industry, energy, healthcare etc and which operate in a number of countries. To ensure sound operations of these divisions, Siemens has installed such a structure to separate its domestic and international business activities. It helps in running business around the world efficiently while having the central monitoring body in home country (Slater and Olson, 2002). There are different organizational structures that are used while operating internationally. They are based on objectives and visions of organization that helps shape their organizational structure. These structures are discussed as under:
Functional Structure – Functional structure consists of top management below which departments like purchasing, manufacturing, marketing and finance exists. It may not be necessary that all these departments are in one country. Production or manufacturing department can be within a different country where resources are cheaper and easily manageable (Forshaw, 2006).
International Division Structure – This kind of structures are mostly used by companies like Siemens and they are highly effective for operating internationally. This structure has its headquarter in one country along with its domestic divisions in the same country but different divisions and one division in foreign countries with two different parts in two different countries. This is called international division structure because it basically has a complete division in foreign company (Kounev, 2009).
Types of Partnerships
There are various types of partnerships Siemens currently has, one of which is Alliance partnership which it has with Cognizant. Siemens also has a number of different organizational partnerships such as channel, consulting and system integration, software and technology, etc and all these partnerships make company capture diverse market on global basis (Green, n.d).
Strength of International Brand
Drivers of Siemens have been operational excellence people excellence and corporate responsibility over years and its goals are performance and portfolio, leading market position, sustainable growth and profit, and strategic reorientation of business units. All these drives and goals have brought company to the extent where brand identity among global customers is quite strong (Paul, 2011).
State of Politics and Regulation in Countries
In Germany, company is subjected to German and European corporate law and in the UK Siemens must abide by country’s English legislation which is specific to the market. Company is also subject to the fiscal policies within the countries it is currently operating in and also there will be control on import and exports on the products of company in different countries (Marković, 2012).
Siemens Intellectual Property Protection
Siemens holds major patents that facilitate the practical implementation of various technologies it invents. Company’s constantly growing portfolio of patent has always continued to safeguard this competitive edge over the years. In this way, Siemens holds protection of its intellectual property in the industry (Forshaw, 2006).
Due to international environment, Siemens faces a range of moral and ethical issues such as:
Discrimination: While operating in international business environment they have to gone through various types of discrimination on the basis of caste, creed and most importantly sex. There are some countries who do not allow working of women which can create problem for Siemens while recruiting employees as in the recent times women are much more skilled as compared to other sex (Jones and et.al., 2009).
Pay inequality: It is one of the longest running ethical issues which is being faced by Siemens in international environment. It has been observed that women earn only 77% of what men earned for full time work. So by following such practices they faces lot of difficulties (Kunnanatt, 2011).
Conflicts of interests: This issue arises at the time when professional and professional obligation arises against obligation. This might create chances of conflict for management of Siemens. This is due to the fact that they will choose a person in global market who they know instead of most qualified applicant (Hurn, 2008).
The corporate strategy of Siemens is to provide long term benefits to the society in which it operates. They carry out variety of activities ranging from philanthropic disaster relief to strategic shared value and most importantly to protect the environment. One of the most important is to control the carbon (CO2) emissions so that environment can be protected from harmful gases. In order to attain this they have adopted various measures. But on the flip side, lot of conflicts has been occurred due to this (Slater and Olson, 2002). This is due to the fact that their business is to produce electronic and electrical products which do not get well with their corporate social responsibility which leads to creation of number of conflicts such as slow attainment of business aims and objectives, vague roles and so on. In the similar manner, management has undertaken wide range of actions for the purpose of eradicating some of ethical and moral issues such as discrimination, conflicts of interests as well as pay inequality in international business environment but due to different policies of nations it did not become possible to comply with this (Fulford, 2013).
There are various legislations, regulation or guidance which is being related to corporate social responsibility and can be adopted by business enterprise is enumerated as under:
Race Relations Act (Statutory Duties) Order 2001: This act was imposed by UK government in order to prevent discrimination on the grounds of race, color, nationality etc. Commission for Racial Equality was established within this legislation to make sure that all the rules and regulations were followed properly (Hurn, 2008).
Disability Discrimination Act 1995: The major rationale behind formation of this act was to make unlawful to categorize people in terms of their disability at workplace, transport, goods and services and so on (Navarro and Martinez, 2009).
Employment Act 2002: This is regarded as one of major piece of legislation which can be adopted by Siemens. This legislation was created to provide assistance to parents so that they will be able to balance their work as well as family life. In the similar manner, it constituted some of provisions on equal treatment for fixed term employees along with time off for learning representatives of trade union. It also focuses on resolving disputes which might arise at workplace due to any reason (Wit and Meyer, 2010).
Companies Act 2006: This act is comprises of 1300 sections and at the same time it has covered 700 pages and approximately 16 schedules. This can be adopted by business enterprise such as Siemens AG so that management will be able to have a deep understanding of environment and protecting community which can lay impact on their overall operations in the long run (Akan and et.al., 2006).
Attributing the above facts it can be stated that there are global business strategy is very important for organizations so that they can operate in international business environment. Various techniques with the help of which business environment in which Siemens AG is operating can be assessed along with its impacts. Globalization has largely affected the business enterprise which has delivered number of challenges, benefits as well as opportunities. By means of global organizational structure Siemens AG will be able to attain success at international level. Company has adopted wide range of international operations such as partnerships, global brand, policies and procedures and so on.
In addition to this, they have made the best possible use of their corporate social responsibility and quite well known as corporate citizens. There exists a range of moral as well as ethical issues which is being faced while operating in global business environment. Due to which they are facing conflicts as they are not able to meet their objectives effectively and efficiently because of their corporate strategy of CO2 emissions towards emissions. Siemens AG can adopt legislations and guidance which are related to CSR activities so that they can work smoothly without posing any difficulty.
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