Introduction
From the company’s humble beginning as the telegraph-bauanstalt von Siemens and Halske in the year 1847, the company has managed to grow into the second biggest employer in Germany, having more than 427,000 employees worldwide by 2009. The company’s 150 years history is characterized by the ingenious inventions as well as the trend-setting developments. With time, the company diversified their business to include a wide assortment of electrical engineering applications. The company’s earliest specialty was on the heavy current engineering which encompassed finding the means to satisfy the growing power requirements of the contemporary industrial machinery. Through their extensive expertise in electrical engineering, the company expanded its operations to encompass the generation of electric power. Although most of the company’s initial power plants relied on coal for their operations, the company was additionally undertaking major investments in R&D on the alternative sources of energy. The company continued with the diversification of its operations even further from the mid 19810s where it expanded to wind energy. Alternative energy generation technologies continue to be the major priority at Siemens, with their emphasis being on solar as well as wind applications.
The company’s energy sector encompasses five divisions which include renewable energy, fossil fuel generation, oil & gas, power transmission as well as power distribution.
What Problems are they facing In the Case?
The current situation that Siemens is facing relates to the formulation of a strategy to guide in the best position that the company will adopt in their effort to dominate the global renewable energy market. The main hurdles revolve around the fact that the stakes are high as a result of the recent financial turmoil as well as the credit crunch that are making it harder for them to reach fast decisions. The decisions that the company needs to make include whether the company should make its best guess about the future by investing deeply in a limited number of options. Additionally, it is imperative that they decide on whether they should cast their net wider and thus hedge their bets on the diverse types of alternative energy. Siemens needs to decide on whether they should focus on a narrower field and what strategy are they going to adopt in deciding on the type of alternative energy that is going to be their leading technology in the future. It is imperative that they decide on whether it is possible for them to foresee any new disruptive innovations and additionally take advantage of them.
Additionally, they need to decide on whether they can pick any alternative technology and additionally ensure that they make it a winner. The last challenge that Siemens were facing is on deciding the manner they are going to compete in the new fields. The decisions revolve on deciding whether the company shall be going alone, develop proprietary knowledge and consequently keeping the probable profits to themselves, with full knowledge that they run the risk of going too far on the wrong path. Conversely, they need to decide on whether they should base their focus on the acquiring of smaller companies that have developed promising technological advancements, aiding them down the development path. Additionally, it is necessary for Siemens to decide on whether making alliances will make it possible for them to share both the returns as well as the risks with a partner thus becoming their optional solution to the domination of the global alternative energy industry.
Alternative Energy Opportunities Siemens Pursues
There are various types of alternative energy opportunities that Siemens can pursue to realize their global success in the alternative energy sector. The logic behind the clamor for the alternative energies is the use of the natural based resources such as water, the wind, solar radiation or the heat for the creation of energy other than the reliance on the carbon-based fuels.
1. Wind energy is one of the options that Siemens could venture into as a form of alternative source of energy
The common assertion about the wind energy topic is that although it is some disadvantages, it is one of the fasted growing alternate energy sectors and is additionally a trend that should continue. The company has consequently staked a firm presence in the wind energy turbine business, having won some large contracts for the installation of both of as well as onshore wind turbines. On the global arena, the company is the fifth largest installer of wind turbine power by the year 2009, aiming to the second by the year 2012. The portfolio of the company encompasses the diverse stages of wind-turbine development inclusive of the deigning of the components as well as the system, manufacturing, R&D, installation as well as maintenance. These activities have managed to earn the company approximately 19 billion Euros in revenues in the 2008 fiscal year, which accounted for approximately a quarter of the company’s overall revenues. The fact that Siemens has the foundation that is necessary for the development of these alternative energies presents an excellent platform for them to undertake the investment in the wind power energy opportunity.
The additional reason as to why Siemens should venture into the wind power sector is the fact that they have few competitors as a result of the technological complexities of the business. The fact that the market offers a high future potential about the industry growth implies that other competitors are going to enter into the competition mainly from China. However the fact that wind power requires constant maintenance implies that the Siemens will have long-term service contracts, an attribute that makes it instrumental for them to enter into the wind power sector.
Solar energy is the other opportunity that Siemens needs to adopt, considering that the company is already the market leader in the turnkey CSP plants. In this case, Siemens would be able to leverage its plant size, their experience in the development of power plants, as well as the reliability, being a long term service provider effectively. The main reason that the company should target as they undertake this opportunity is the long term servicing required for the generators and turbines long after the completion of the plant’s construction.
Hydropower is the additional opportunity that Siemens needs to capture. The fact that the company has been a strong player in the hydrometric power dams implies that they have the experience that can set them apart from their competition. There numerous opportunities for the company to expand into such as in the US where the company government has designed policies to increase their low costs hydroelectric power production. The US offers excellent expansion opportunities as there are more than 5,677 sites that have an undeveloped capacity of approximately 30,000MW, which offer an opportunity for Siemens to introduce their expertise.
Geothermal power is the additional opportunity that Siemens can exploit because the company has an expansive wealth of expertise on electric energy. In the production of this energy, two shafts are drilled deep into the earth core, with water being pumped in through one shaft and extracting energy through the other shaft inform of steam. The main attribute that makes the technology an excellent option for Siemens is the fact that it can be installed in any area that requires energy. Additionally, geothermal plants need minimal amounts of fresh water as well as external fuel sources and their layouts makes them highly scalable.
How Aggressively Should Siemens Pursue These Opportunities?
Siemens should need to pursue these opportunities with aggressiveness. For instance on the wind power opportunity, they should attack the Europe market with utmost aggressiveness considering that they are among the best in the region as well as the fact that are minimal transportation costs. About the expansion to other regions in the world, they should be the first movers of the technologies as they already possess the technology as well as the R&D attributes. Waiting to introduce their technologies will only serve to diminish the market for their alternative energy. The advantage that makes it imperative for Siemens to be first movers of these alternative energy technology opportunities is they already have a reputation for being the best in the world as well as the fact that they have exceptional R&D strategies in the same sector.
Should They Go It Alone, Form Strategic Alliances Or Pursue Acquisitions?
On whether Siemens needs to undertake these opportunities either alone, form alliances or acquisitions, various factors are taken into consideration. In the case of wind energy, Siemens possess the best technology, but the costs of transporting these turbines are very high, a factor that limits their expansions. The fact that there are few established competitors in the industry for Siemens to acquire or engage in alliances implies that their best option is to set up industries in their desired markets.
Regarding solar energy, the fact that the company has the best turnkey CSP plants in the world makes acquiring the existing companies in their desired markets the best option as they will not have to share their profits. Siemens has minimal technologies in the hydropower generation and thus pursuing alliances with the established players in their desired markets is a worthwhile plan where they will be supplying technologies and expertise. Geothermal powers involve minimal costs and through their technology as their main bargaining, Siemens should enter their desired markets alone.
Conclusion
Siemens is facing a critical point in their survival in the alliterative energy production sector. The company possesses some of the best technologies in the world relating to the production alternative energy, and the contemporary market challenges are making it imperative for them to make decisions that will see them enter excel in the sector. Some of the decisions that the company has to make revolve around the number as well as the type of alternative energies they will be pursuing. From the assessment of the case, it is clear that wind power, solar energy, geothermal power as well as hydropower present the company with the best opportunities to succeed in the alternative energy markets.