Professional Documents
Culture Documents
SIEMENS Corporate Solutions Bachelor 090723 FINAL AK
SIEMENS Corporate Solutions Bachelor 090723 FINAL AK
Chair of Management
Friedrich-Alexander-Universität Erlangen-Nürnberg
Siemens CorporateSiemens
StrategyCase
– Teaching
Study SS09
Note 1
The main part of the case focuses on the question of “Does
Siemens create value?”
First exercise
After reading through the notes on his table, Peter Löscher presses a button on his
telephone and says, “Mrs. Müller, please connect me with corporate strategy. I
need to talk to Franz Steinhoff.” After a few seconds, he speaks with Steinhoff.
“Steinhoff, I want you to comprise me a report on the following questions:
Imagine, you are Franz Steinhoff, Head of Corporate Strategy. Work with your
team to find answers to Peter Löscher’s question. When discussing the answers,
take into account the opportunities and threats, strength and weaknesses of
Siemens and the overall strategic values of this company.
Peter Löscher wants you to analyze the current portfolio. You decide to apply the
BCG traffic light portfolio. This portfolio consists of three dimensions (see page 90
in your course package; diploma: page 40):
1. Strategic assessment
2. Financial performance
3. Relative share of total revenues (size of bubbles)
• A&D 18%
• I&S 1% • PG 21%
• SBT 5.5% • PTD 18%
• Osram 2.8% • Med 19.7%
• TS -1% • SIS -6%
The relative market share of A&D is missing, but you know that the strongest
competitor of A&D, ABB, had revenues amounting to EUR 13,382 million in 2007.
Discuss the respective cut-off points. For market growth, consider the targets
formulated in the corporate strategy (exhibit 2). Furthermore, assume that, in 2007,
the average growth rate of all industries in which Siemens is active, was 6%. For
relative market share, consider choosing 1 as the cut-off point. However, you may
also want to use a different benchmark.
Siemens Corporate - Exercise/Aufgabenstellung 5
To prepare a portfolio discussion, you choose to visualize
the situation in a BCG traffic light portfolio (II)
Assumptions for question 2
(3) Relative share of total company revenues. Use the relative share of total
company revenues to display the importance of each division (size of bubbles).
This dimension is common to every of the three portfolios.
Detailed cash
flows
42.909
WACC: 7.5 % 46.345*
g=2%
15.018
2.499
2.154
1.857 27.891
110”4*
Conglomerate
A&D 27“9 10% discount
I&S 5“4
SBT 5“2 99“0
Osram 4“8 Stock
TS 7”0 value
PG 30“9
*
PTD 9“6
Med 19“3 Stock
amount
SIS 0"3
Equity value of Sum of the Market
divisions parts value 2007
Relative
Relative Market
Operations Groups NOPAT market ROCE Spread EVA ∆ EVA
revenues growth
(in millions of euros) share
2007 2007 2007 2007 2007 2007 2007 2005-2007
Automation and Drives
1,255 21% 18.0%* 115% 17.9% 10.4% 728 308
(A&D)
Industrial Solutions and
244 12% 0.9%* 47%* 20.3% 12.3% 148 207
Services (I&S)
Siemens Building
214 7% 5.5%* 45%* 11.8% 3.8% 69 77
Technologies (SBT)
Osram 289 6% 2.8%* 67%* 14.5% 7.0% 139 25
Transportation Systems
119 6% -0.9%* 32%* 40.1% 32.2% 95 121
(TS)
Power Generation (PG) 690 17% 20.9%* 60%* 50.3% 42.3% 580 246
Power Transmission and
372 10% 18.1%* 49%* 19.9% 11.9% 223 264
Distribution (PTD)
Medical Solutions (Med) 737 13% 19.7%* 63%* 9.0% 1.0% 79 -175
Siemens IT Solutions and
146 7% -5.8%* 42%* 57.6% 49.1% 124 568
Services (SIS)
Total Operations 2,213 1,669
4,064 100%
Groups Ø 246 Ø 185
* Not to be computed by students
Siemens Corporate Strategy – Teaching Note 14
Computing the variables for FY 2007 (computation based on exhibit 6 and 7, assignment on page 15-17 of this
teaching note)
Overview:
• NOPAT = EBIT – tax (40%) = EBIT * 0,6
• Relative revenues = revenues of each division / total company revenues (determines the size of bubbles)
NOTE: Students will not have time to draw sizes of bubbles perfectly, however: 10%=1cm could serve as
an indication
• Market growth given in Assignment
• Relative market share = own revenues / revenues of leading competitor (computation by students just for
A&D)
• Spread = ROCE - WACC = (NOPAT / capital employed) - WACC
• EVA = NOPAT – cost of capital = NOPAT – (capital employed * WACC)
• ∆ EVA (2005-2007) = EVA (2007) – EVA (2005)
12
8
SBT
4
Osram
0 I&S
TS
-4
SIS
-8
-12
Relative market
0,0
0.0 0,2
0.2 0,4
0.4 0,6
0.6 0,8
0.8 1,0
1.0 1,2
1.2 share 2007
Siemens Corporate Strategy – Teaching Note 16
Spread and ∆ EVA are the dimensions which determine the
financial performance of the divisions
Financial performance sub-portfolio
0 Med
SBT A&D
-10
-20
-30
-40
-50
∆ EVA
-600 -400 -200 0 200 400 600 2005-2007
Siemens Corporate Strategy – Teaching Note 17
Use a scoring approach to evaluate the respective dimen-
sions of the strategic assessment and financial performance
Scoring approach in order to prepare BCG‘s traffic light portfolio
Strategic 5
Assessment A&D
4 Med PG
PTD
3
Osram
2 SBT
I&S
1 TS
SIS
0
Financial
0 1 2 3 4 5 Performance
Siemens Corporate Strategy – Teaching Note 19