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Siemens has been known to be a major name in the energy and power sector for the last decade and despite the name of the company in the technology sector, it has been identified that the company has been a remarkable example of effectiveness and innovation. Founded in 2008, the energy sector of the company aimed at generating power from a wide number of sources. Extraction, transport of oil and conversion has been the major sources of power generation as used by the company (Stahl, et.al, 2013). In order to comply with the sustainable laws of energy generation various alternative sources of energy generation have also been used by the company and these include the different renewable and alternative sources of energy generation.
Owing to the growing needs of sustainable energy generation and the increasing awareness of the people, it has been identified that the need for ensuring that the business domain of generation of power should not limit the growth of the company and hence the need to develop green energy is majorly generated. In regard to this concern it has been identified that the shift of the company should be towards the development of energy generation options which do not deplete the natural sources of energy generation. And as per the futuristic business view of the company, with regular and periodic investments of the company into the various green activities, the opportunity of growth and sustainable energy production is the proposed way forward. Along with the use of green sources of energy to conserve the natural sources of energy generation, the company is also in a research and development mode for generating energy using new sources of energy generation (Pegelsand Lütkenhorst, 2014).
This paper aims to analyse a case study of Siemens and the entire discussion has been segmented for the ease of comprehension. The first part of the report deals with the proper and effective identification of the key strategic issues which are associated with the generation of energy and the various problems which are associated with the same. The second segment of the report aims to analyse the impacts of the issues which have been identified and lastly a section pertaining to the recommendations which can be stated has been presented in order to mitigate the risks and problems which are identified. The recommendations also provide the solutions for the issues identified with a purview of making the company adopt green methods of energy production and also aims at effective conservation of energy.
Identifying the key strategic issues and problems faced by the company
Energy conservation is a vulnerable business which heavily relies and impacts the environment and therefore is under a high level of scrutiny as far as the monitoring agencies are concerned. Recent changes in the needs of the human population and the various industrial developments have been a major concern for the environmental friendly organizations who believe that the recent changes in the activities of the humans are slowly degrading and depleting the planet. Analysis made by the Wolfgang Dehen, the CEO of the company represents the various issues which are faced by the depletion of the natural and non-renewable sources of energy (Shaik, 2016). Also as per the internal analysis of the company which has been conducted, it has been identified that the different processes and methods which are used by Siemens Energy for the manufacture and generation of energy are not sustainable and environmental friendly in nature in all respects. Operational activities of the company such a production and distribution of energy also contribute to the harmful impacts which are depleting the natural resources. Also, it has been simultaneously identified that the climatic and weather based changes have also been noticed with respect to the impacts laid on the environment by the human and social activities and most of such impacts have been considered to be irreversible in nature (Murugesanand Gangadharan, 2012).
Dependence on Fossil Fuels
One of the first and the most important strategic issue which is faced by the company is the fact that all the present processes of the company have a high level of dependence on the fossil fuels. It is also common knowledge that fossil fuels are non-renewable in nature and are depleted beyond the control on damage. In fact, owing to the growing needs of energy and the dependence of the companies and global communities on the fossil fuels has been attributed as the prime reason behind the Oil Crises of 1970s. Apart from the other social and cultural impacts which have been lent by this factor, there are also major changes which occur in the global economic aspects due to the heavy dependence of energy on the fossil fuels. Controlling the prices of the energy which has been generated and the different aspects of production and distribution have led to the increase in the cost of production which is then translated to the inflated costs of energy (Oneaand Rusu, 2014).
Lack of sufficient and efficient Energy
It has also been observed that the major problem which is impacting the company is the lack of efficiency in the energy which is being presently generated. This may be attributed to the use of technologies which are not suited to the present needs of energy conservation and production. Technologies which are associated with the generation of energy in present times have to be modern and compliant with the present day needs of energy production, generation and distribution (Gómez-Expósito, Conejoand Cañizares, 2014). The older technologies being used also result in a higher value of energy wasted. In this regard, it has been identified that a key strategic issue would be the identification, discovery and production of sources of energy generation and transport, which cost lesser and rank higher on the efficiency of energy which is produced. Hence, as per the internal analysis of the company which was conducted, it has been identified that the primitive and conventional methods of energy generation and distribution pose a threat to the growth and sustainability of the company (Bombergand McEwen, 2012).
Lack of awareness and research
It has been identified that despite the fact that the company does recognise the need of energy generation and distribution which uses alternative means and does not rely much of non-renewable sources of energy, there is lack of research and awareness, of the alternative sources of energy and alternative energy generated is lesser and thus not identified. This is the prime reason due to which even though the need of the alternative and green sources of energy has been well identified, the means to place into reality the propositions is not well defined as yet (Ming, et.al, 2014).
Risk identification and Mitigation
This is also a strategic issue which has been impacting the company. While the company does contain the ability to take the risks which are needed to progress further, the mitigation of the risks is not compounded and identified. Siemens is also faced by the problem of deciding upon the future of the course of action of to be taken. There are two strategic ways which can be applied to this condition. Either the company can progress forward and discover the new ideas by itself (Woodand Wollenberg, 2012). This may call for a higher ration of risk which could be faced. Also, it has been identified that the other route would be to enter into partnerships and mergers such that the costing and risks incurred in the development of the new technologies would be equally shared between Siemens and the business partners.
Diversification of services
Based on the problems which are being faced, it has been identified that the contribution which the company can make with respect to a green mode of energy generation can be in two proposed methods. One of the ways would be to diversify the present processes implemented in the company and the second approach would refer to the inclusion of new processes which can be used to improvise the processes of the company (Bollen, 2000). In this case, it also becomes essential to identify the fact that the choice of the alternative sources of energy which has to be made, would be one of the most important aspects determining the success of the new processes to be included.
Using Disruptive Innovation
Lastly, it has been identified that the use of the technology would be improvised with the effective use of the disruptive technology which needs to be selected as per the end results required. An alternative technology or the disruptive innovation which needs to be used has to be economic and should be chosen in congruence with the various processes which would be operational (Rasmussen, 1997).
Evaluation and Discussion
One of the most important findings which impacts the future strategies of the company is the effective manpower pool which the company has and by being one of the biggest employers in Germany, the types of resources that the company can put to use, is not limited and hence acts as a strength to the company (Weiner, et.al, 2012).A SWOT analysis of the company reveals that trained and effective manpower along with past expertise is one of the biggest strengths of the company along with a strong brand name. One of the threats to the industry is the increasing consumer awareness and the growing concerns about the environment which make the expansion of the industry limited.
Based on the PEST analysis it has been identified that the resources and technology which is needed to expand the domain of business to alternative energy generation sources is limited and hence the limitation of expertise. Also, the growing social and cultural changes are increasing the demand of energy produced. This has also impacted the performance of the industry as a whole where in the political and environmental reforms and laws have made it difficult to generate large scale power (Shabanova, et.al, 2015).
An analysis of the five forces as described by Porter refers to the standing of the company and it has been observed that in terms of threats of substitutes and threats of the suppliers, the company has a strong standing where in the domination of the consumers and the market is stronger. Owing to lesser number of competitors and new entrants in the market, the idea of generation of power using alternative sources of energy thereby is a suitable business option (Dobbs, 2014). It has been also identified that with effective interventions, and proper utilisation of the manpower, developing the effective green sources of energy generation can be made possible.
In terms of the technological variances, there are two different sources of energy which have been identified. Carbon Fuels and the new alternative sources of energy are the two sources of energy generation which can be used. There has to be a shift of the company from the dependence on the fossil fuels for the generation of energy towards the extensive use of alternative sources of energy. The primary focus of the company should be on the effective utilisation of the alternative sources of energy which can be used to enhance the efficiency of the power and energy generated (Venkateswararao, et.al, 2013).
Implication and advantages
Limitations and present scenario
Windmill design and implementation for the production of energy ranking high in megawatts is a probable solution. This source can be used to supply energy to households.
Wind as a source of energy also contains the potential to be further developed.
There are certain constraints which limit the use of this technology with respect to the effective utilisation.
It has been observed that one of the biggest limitations, which can hinder the prospect of this alternative source of energy is the costing incurred. By incurring the costs which are needed for the set ups, the prices of the energy generated would be higher.
For this the company would have to ensure that the partnerships and mergers made aim towards increased revenue generation.
This form of energy has the ability to cater to the large scale needs of energy. One of the prime advantages of this mode of energy production would be the lesser use or machines with movable parts used in this form of energy generation (Council, 2012)
The process of generating solar energy requires a large scale absorption of energy and therefore the land area needed is immensely large scale. Also, the efficiency of 25% is the maximum which can be extracted from the solar panels.
Another source of energy which can be used in the nuclear energy where in the renewable nature of this source of energy is the biggest advantage (Sharma, et.al, 2012)
The only limitation of this method is the rising number of accidents associated with this production and thus the costing incurred. At present, Siemens is working towards effective research conducted in this department. Partnerships of the company have been formed in Russia to further explore the options.
The biggest source of renewable energy is water and owing to the surplus availability of this source of energy it is also lucrative. The primary advantage of this source of energy is the fact that the impacts on environment and weather would be the least in this form of energy generation (Zinkle, S.J. and Was, 2013).
Equipment and processes needed to utilise the source of energy is cost expensive and not viable in terms of the risks which can be mitigated. For this mergers and acquisitions are needed at a larger scale
Based on the analysis which has been conducted, it has been estimated that the most suitable solutions as devised for the energy generation using alternative sources would be the choice of investments made in the domain of wind and solar sources of energy for generation and distribution of energy. There are two further interventions which need to be identified. One would be the appropriate mergers and acquisitions which would be needed to form the business partnerships to conclude this form of energy utilisation. And the second would be the distribution and splitting of the costing incurred in order to share the expenses and investments incurred.
It has also been identified that apart from Siemens, there are other companies which would consider entering this market. Hence it is identified that at this stage, to patent the technologies and equipment needed, would open another business avenue for Siemens. Therefore, by ensuring that the entry into the market using solar and wind as sources of alternative energy production would prove to be viable for Siemens and a market domination in this industry can be thus created.
Recommendation and Suggestions
The above report aims to analyse the conditions and also determines the alternative routes of energy generation which can be considered. However, it has also been identified that the sources of alternative generation which have been identified, also contain limitations and drawbacks, which may impact the effectiveness of the processes when applied. Hence, a detailed analysis of each of the solutions which has been provided is essential in order to identify the safest approach which can be undertaken in order to reduce the risks and losses which can be incurred.
It is imperative to note that for a company like Siemens, it is necessary to ensure that more than the financial losses which can be incurred, the impacts lend by negative reputation and publicity are more harmful and thus should be considered. Based on an evaluation of the present state of the business and the future strategies which have been defined, it has been identified that the following recommendations can be applied.
1. The research and development behind each of the alternative sources of energy is the first and the foremost requirement. Hence, before the solutions are actually adopted as the alternative solutions to development of green energy, the research and development needs to ensure that stability of the solutions offered (Kortelainen, et.al, 2012).
2. For either of the alternative solutions which are chosen, there is need to select the technology and the disruptive innovation associated with the alternative source of energy.
3. Online auctions can also be applied in order to auction the collar power plants once researched and developed. As mentioned, it has been identified that this solution would require, the finalising of a large space location for the trapping of the solar energy. Hence the location which would be chosen for the plant has to be decided after a careful evaluation of the internal and external factors impacting the solar plant (Han, et.al, 2013).
4. For the option of the utilisation of nuclear sources of energy, the impact created is majorly due to the ineffective disposal of waste which then enters the air and water streams. This is why to identify the most appropriate and the safest ways to dispose the energy is a major component of the process and should be decided upon even before the process is implemented.
5. In all the conditions, it has been necessitated to ensure the safety and satisfaction of the employees is essential. This is owing to the fact that the increase in security and satisfaction of the employees would also translate to further enhancement in the performance of the employees.
6. In order to comply with the costing incurred in the utilisation of water power, as an alternative source of energy, the dams and methods used should be commissioned, such that the costing is borne and distributed.
7. The different partnerships to be made have to be evaluated in terms of the end goals of the partnering companies. Only the companies which aim to include green energy in their businesses should be partnered with (Yoon, et.al, 2014)
8. Reliance on the renewable sources of energy has to be increased gradually and this is further reiterated with the fact that the depletion of the non-renewable sources of energy is at an increasing rate.
The net profit margin of the company has an increasing trend since the last few years. However during the year 2009 the net profit declined but it is still positive which shows that the company has a growth potential for long term. Also the company is earning high returns for its owners on their investment. The return on assets as well as the return on equity earned by the company during the last three years have declined in the previous year but were increasing in two previous years from the last years. This shows that the company will be able to earn high return for its shareholders and investor (Appendix A)
The current ratio of the company which denotes the capability of its current assets to finance its current liabilities during the last three years as calculated is more than 1 for all the three years. This means that the company has a sound liquidity position and the current assets are efficient as against the current liabilities. Also the current ratio has an increasing trend during the three years.
The debt to equity ratio of the company for the last three years is less than 1 which means that the debt of the company is less than its equity and thus there is low risk of insolvency due to debt and interest cost for the company. The company has an optimum capital structure with appropriate mix of debt and equity.
The earnings per share of the company are fluctuating due to changes in the price of its shares. The company is paying dividend at a constant rate during the last three years when the dividend per share is $1.60. Before that the dividend per share increased every year. This indicates that the company has good track record of payment of dividend to its shareholders and thus the investors can earn huge profits from investing in the company. As far as share price is concerned the share price has been fluctuating and during the past seven years highest was observed in the year 2008 and 2007 at $108.96 and $111.17 respectively (Appendix A).
Evaluation and Conclusion
From the above analysis it can be concluded that the company has a sound liquidity and profitability position. Despite of decline in the profits in the year 2009 the company has a long-term growth potential and high profitability. Thus the investors can earn huge profits from their investment into the shares of the company.
It has thus been identified that by focussing on the generation and distribution of energy using the alternative sources of energy is the most lucrative business domain for Siemens and owing to the fact that the technology and companies entering this domain of energy generation is lesser at present, the company also holds a high potential of emerging as a market leader in this industry. Despite the fact that Siemens is a market leader, it has been identified that all the current strategic issues and problems being faced by the company, can be solved using the proposed intervention of shifting to alternative sources of energy generation. Apart from the fact that such interventions require a higher value of financial investments, the impact on the name, domination and reputation of the company is a bigger threat to the company. This can also be attributed to the increasing awareness of the targeted market groups and the depletion of the non-renewable sources of energy. It can also be concluded that the company has a high profit and growth potential in long-term and the energy business is growing business with the capability of earning high returns for its investors.
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