Name of the Company: Siemens AG
Business Sector: Engineering and Capital Goods, Diversified
Operating Geography: Europe, Germany, Global
About the Company: Siemens is German conglomerate with business interests primarily in electronics, industrial equipment, healthcare, infrastructure and energy. It was established in Berlin in 1847 and currently employs more than 351,000 people globally.
Revenue: €79.64 billion (FY ending 30th Sept 2016)
Competitive Analysis of siemens
|1. Number one globally in industrial digitization, automation and electrification.|
2. Consistent shareholder returns and strong ownership culture
3. Dedicated unit ‘next47’, for innovation and development of next-gen technologies
|1. Reliance on third party vendors
2. Lawsuits faced by Siemens can significantly affect profitability
|1. Siemens can strengthen leadership in digitization by combining software, platforms & services|
2. Digitization, a huge market with new opportunities and rapid growth over the next few years.
3. Increase in Smart City projects globally to spur demand of next-gen technology which can drive Siemens’ growth
|1. Threats from competitors like GE in the US market which get advantage under the new administration which favors domestic firms and local manufacturing
2. Terrorist attacks in Europe and instability in Middle East increase geo-political risks which may dampen investment climate
3. Fast paced changes in regulations and compliance measures in industries like healthcare, energy and cloud computing can impact Siemens businesses
1. Number one globally in industrial digitization, automation and electrification: Siemens is the global leader industrial digitization, automation and electrification and also an established player in other fast growing industries such as healthcare technology, energy management and mobility. The company clocked a revenue of ~€18bn in Enhanced automation, ~€42bn in Enhanced electrification and ~€3.3bn in software and digital services in 2016 which is the highest amongst its peers. Siemens has also built a focused strategy around the above areas to become a comprehensive, integrated and unique enterprise.
2. Consistent shareholder returns and strong ownership culture: Siemens has delivered consistent shareholder returns over the past few years. There has been a continued increase in dividend payouts since 2014 with a payout ratio ranging from 40-60% of net income. Siemens has also committed to completing a buyback of up to €10bn worth of shares in the period 2012-2018. The Osram’ spin-off also created value for the shareholders and also involved the payout of a special dividend of €2.40 per share in FY13. The company also has a strong ownership culture which fosters a sense of belongingness in the organization. Over 165,000 employees own Siemens shares which is almost 50% of the total employees globally and the senior manager are mandated to hold the company’s shares. The company also has an attractive stock option scheme for the employees.
3. Dedicated unit ‘next47’, for innovation and development of next-gen technologies: Siemens established a unit, next47 in 2017 which had a comprehensive pool of its startup activities and focused towards accelerated innovation. It was also granted a €1 billion budget for five years. Its other research and development (R&D) activities are focused towards developing next-gen innovative and sustainable solutions. It spent €4.7 billion or 5.9% of its revenues towards R&D expenses in 2016.
|1. Siemens is based out of Germany, which has cordial relations with most of the countries |
2. Terrorism and civil unrest and political uncertainty across Europe, Middle East and African (EMEA) markets may impact Siemens business
|1. Asia to be key market for Siemens with China growing fast and opportunities in Iran after ease of sanctions
2. Growth in smart city projects globally are huge potential for Siemens as it has expertise across domains
|1. Siemens’ Europeans@Siemens program enables students from select countries to participate in work-study programs in Germany|
2. Fosters ownership culture with employee shareholding and invests highly in employee training and education
|1. Siemens to strengthen leadership in digitization and automation by combining software, platforms & services.
2. Dedicated unit ‘next47’, for innovation and development of next-gen tech with €1 billion budget for five years will drive growth
|1. Lawsuits faced by Siemens can significantly affect profitability||1. Siemens’ target to become Carbon neutral by 2030 by investing over €100 million
2. Siemens Environmental Tech helped its clients reduce their CO2-footprint by 521 million tons in FY16
1. Asia to be key market for Siemens with China growing fast and opportunities in Iran after ease of sanctions: Asian markets will be key to Siemens growth over the next decade with plenty of opportunities in countries like China and India. There are large interconnection projects being planned in India and China as demand for energy management by utilities grows. Iranian markets have also opened up to foreign companies, especially after the ease of sanctions and provides lucrative opportunities.
2. Growth in government allocations for smart city projects globally: Siemens has a growing presence in smart city projects and is involved directly and indirectly in several smart city initiatives globally. The smart cities market size is set to grow to USD 757.74 billion over the next three years by 2020 according to MarketsandMarkets as government allocation for Smart City infrastructure increases. Smart city projects according to analysts will help in accelerating economic growth and GDP of the country and thus will have high ROI and be highly beneficial in the long run.
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Skanska SWOT and PESTLE analysis has been conducted by Saurabh Jain and reviewed by senior analysts from Barakaat Consulting.