Fit42010: Achieving the Vision


Deepika Varshney
Faculty, Marketing

Pedagogical objectives:

  • To understand the issues related to diversification and its impact on the financial performance of a company.
  • To study the impact of vision and its subsequent impact on organizational structure.
  • To comprehend siemens assorted product portfolio.
  • To understand how siemens has expanded internationally through different entry modes.


The big question- should a company aim only for Organic Growth that gave it a strong Brand Identity  and recognition or  enter into Joint ventures and alliances to  surpass its peers? Experts say it is one of the trickier questions to answer. But answer lies in the gains that a company reaps after such restructuring.

Companies gain by Strategic alliances provides synergies :i.e. cost synergies, sales synergies, R&D synergies. Mergers provide the acquiring company an opportunity to increase the market share without any additional investment. It also eliminates competition, provides growth, increase supply chain, creates a goodwill, pricing power etc.

Companies which decide to diversify , often merge with companies that have deeper market penetration in operation. leads to improved financial performance. Large firms generate cash that can be invested in other ventures. That is, the core business sustains itself on its money making ventures, and uses this cash flow to create new ventures that generate additional profits. One of the primary reasons is the view held by many investors and executives that "bigger is better."

Case Body

Siemens AG is Europe's largest engineering conglomerate. Siemens' international headquarters are located in Berlin and Munich, Germany. The company is a conglomerate of three main business sectors: Industry, Energy and Healthcare with a total of 15 Divisions .Siemens is today a technology giant in more than 190 countries, employing some 440,000 people worldwide. It work in the fields of energy, industry, communications, information, transportation, healthcare, components and lighting have become essential part of everyday life.

Siemens was founded in Berlin by Werner von Siemens in 1847. As an extraordinary inventor, engineer and entrepreneur, Werner von Siemens made the world's first pointer telegraph and electric dynamo, inventions that helped put the spin in the industrial revolution. He was the man behind one of the most fascinating success stories of all time  by turning a humble little workshop into one of the world's largest enterprises. As Werner had envisioned, the company he started grew from strength to strength in every field of electrical engineering. From constructing the world's first electric railway to laying the first telegraph line linking Britain and India, Siemens was responsible for building much of the modern world's infrastructure. While Werner was a tireless inventor during his days, Siemens today remains a relentless innovator. With innovations averaging 18 a day, it seems like the revolution Werner started is still going strong.

Strategic overview

Siemens' strategy aims to achieve leading, profitable positions in regional and technological markets where major global trends (so-called mega trends) are creating strong demand for solutions. Those trends are urbanization, demographic change, climate change and globalization. Their  Fit42010 strategic program specifies performance targets for effectively meeting market demand related to mega trends. For example, one of our performance targets is to shape our business portfolio so that we are one of the top two companies in each of our businesses as measured by market share

In fiscal 2007it initiated our Fit42010 program as a follow-up to the Fit4More program that was concluded in April 2007. Like the predecessor program on which it builds, Fit42010 specifies the priorities and performance targets which  will enable siemens  to achieve the  overall strategy, which is to sustain profitable growth by addressing the opportunities inherent in global mega trends. The program thus contains both financial and non-financial performance measures chosen to close the gap with the  leading competitors

The non-financial performance measures included in Fit42010 are grouped into four categories: People Excellence, Portfolio Strategy, Operational Excellence and Corporate Responsibility. these four categories are  "levers" that enable the company  to achieve  financial performance targets.

An `umbrella brand` is a brand that covers diverse kinds of products which are more or less related or unrelated . It applies also to any company that is identified only by its brand and history. Siemens is a conglomerate which follows the concept the of Umbrella Branding .Umbrella branding may impose on the brand owner a greater burden to maintain consistent quality. If the quality of one product in the brand family is compromised, it could impact on the reputation of all the others. For this reason umbrella branding is generally limited to product lines that consist of products of similar quality.

It implemented a new setup for our regional companies in fiscal 2008. These companies are now grouped into 20 "clusters" of countries, which in turn are organized into three world regions. The regions are defined as follows: Europe, the Commonwealth of Independent States (C.I.S.) and Africa; the Americas; and Asia, Australia and the Middle East. Regional companies in each cluster now share support functions and administrative resources, so that they can focus more tightly on the customers, suppliers, media and other stakeholders in their respective countries.

In fiscal 2008 they completed & launched a number of major management initiatives to  enable them to reach their performance targets and execute the  strategy. One of the most fundamental was to realign the operating businesses into a new organizational structure with three Sectors and two Cross-Sector Businesses. The three Sectors are Industry, Energy, and Healthcare. The Cross-Sector Businesses support the Sectors in the areas of finance and information technology.

Industry Sector

In fiscal 2008, Sector profit at Industry increased to 3.861 billion, 10% higher than 3.521 billion in fiscal 2007.The Sector's largest Divisions are  Drive Technologies, Industry Automation, Industry Solutions and Building Technologies, Mobility & Osram . Acquisition of Flender Holding GmbH & UGS Corp were the major milestones in this category.
Siemens offers products and solutions in railway signaling and safety systems, traffic control and automation, electrification, equipment for locomotives and multiple unit system and mass transit vehicles.

Energy Sector

Energy posted Sector profit of 1.434 billion, a 21% decline compared to 1.818 billion a year earlier. , The Sectors divisions are Power Transmission, Oil & Gas, Renewable Energy and Power Distribution& Fossil Power Generation. Siemens consolidates its innovative offerings in the Energy sector by combining its full range expertise in the areas of Power Generation (PG) and Power Transmission & Distribution (PTD).

Healthcare Sector

Siemens Medical Solutions of Siemens AG is one of the world's largest suppliers to the healthcare industry. The company is known for bringing together innovative medical technologies, healthcare information systems, management consulting, and support services, to help customers achieve tangible, sustainable, clinical and financial outcomes. Acquisitions in the area of in-vitro diagnostics - such as Diagnostic Products Corporation Bayer Diagnostics and Dade Behring- mark a significant milestone for Siemens as it becomes the first full service diagnostics company. Healthcare posted Sector profit of 1.225 billion in fiscal 2008, compared to 1.323 billion a year earlier. The Sector's largest Divisions are Imaging & IT, Diagnostics and  Workflow & Solutions division.

Entry Modes at  glance :

In 2008 Siemens Acquired   Dade Behring Holdings, Inc. The laboratory diagnostics company joins the existing business of Siemens Medical Solutions Diagnostics. Siemens  now can offer its customers a unique and comprehensive healthcare solutions' portfolio, which brings together the entire medical imaging, laboratory diagnostics and clinical information technology (IT) value chain under one roof.

In April 2007, the Fixed Networks, Mobile Networks and Carrier Services divisions of Siemens merged with Nokia's Network Business Group in a 50/50 joint venture, creating a fixed and mobile network company called Nokia Siemens Networks. Nokia delayed the merger[14] due to bribery investigations against Siemens.

In July 2008, Siemens AG announced a joint venture of the Enterprise Communications business with the Gores Group. The Gores Group holding a majority interest of 51% stake, with Siemens AG holding a minority interest of 49%[18]

In Healthcare Sector Siemens entered into a Partnership with Health South Corporation in the United States to create the world,s First all-Digital and Automated hospital in which siemens will serve as primary technology provider and support the hospital in health care Information technology application, medical equipments, Infrastructure. The Hospital provides services such as Internet connection to every bed for Videoconferencing, Wireless wellness monitor to evaluate the health status.

Corporate affairs at Siemens

In January 2007 Siemens was fined 396 million by the European Commission for rigging EU electricity markets through a cartel involving 11 companies, among which ABB, Alstom, Fuji, Hitachi Japan, AE Power Systems, Mitsubishi Electric Corp, Schneider, Areva, Toshiba and VA Tech. According to the Commission, "between 1988 and 2004, the companies rigged bids for procurement contracts, fixed prices, allocated projects to each other, shared markets and exchanged commercially important and confidential information." Siemens was given the highest fine of 396 million, more than half of the total, for its alleged leadership role in the incident.

Siemens agreed to pay a record $1.34 billion in fines in December 2008 after being investigated for serious bribery, involving Heinz-Joachim Neubürger, former chief financial officer, Karl-Hermann Baumann, another former CFO and exchairman, and Johannes Feldmayer, a former management board member. The investigation found questionable payments of roughly 1.3 billion, or $1.9 billion, from 2002 to 2006 that triggered a broad range of inquiries in Germany, the United States and many other countries.

In May 2007 a German court convicted two former executives of paying about 6 million in bribes from 1999 to 2002 to help Siemens win natural gas turbine supply contracts with Enel, an Italian energy company. The contracts were valued at about 450 million. Siemens was fined 38 million. Siemens has tightened its internal controls, and implemented strict compliance and anti-corruption measures throughout the company.


Profit (2008)

Profit (2007)










Cross Sector in IT & Finance





When the going gets tough the tough gets going is what siemens is witnessing .Siemens  is going strong on few fronts  but is equally aware of changing market dynamics and its competitors.


Ashwathappa K International Business by Tata McGraw Hill 2nd Edition.

Case studies on Mergers Acquisitions & Alliances, ICFAI Books.

Saxena Rajan marketing Management Tata McGraw Hill 2 nd Edition.

Financial Reports from Siemens.


Deepika Varshney
Faculty, Marketing

Source: E-mail December 21, 2009


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