Siemens faces challenges in the global marketplace. The company will likely require a different leadership style than Von Pierer’s to face these challenges. What style would you recommend to Siemens
Siemens faces challenges in the global marketplace. The company will likely require a different leadership style than Von Pierer’s to face these challenges. What style would you recommend to Siemens
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International
Mgmt
Case
1:
Want
to be More Efficient, Spread Risk, and Learn and Innovate at the same Time? Try
Building a “World Car”
Japanese car companies like Toyota and
Honda Motor Company are pioneering the auto industries truly global
manufacturing system. The companies aim is to perfect a cars design and
production in one place and then churn out thousands of “world” cars each year
that can be made in one place and sold worldwide. In an industry where the cost
of tailoring car models to different markets can run into billions of dollars,
the “world car” approach of Toyota and Honda – and which Ford is hoping to
emulate – is targeted at sharply curtailing development costs, maximizing the
use of assembly plants, and preserving the assembly line efficiencies that are
a hallmark of the Japanese “learn” production system.
As
for Honda, the goal is to create a “global base of complementary supply,” says
Roger Lambert, Honda’s manager of corporate communications. “Japan can supply
North America and Europe, North America can supply Japan and Europe, and Europe
can supply Japan and the United States. So far, the first two are true. This
means that you can more profitably utilize your production bases and talents.”
The
strategy of shipping components and fully assembled products from the U.S. to
Europe and Japan couldn’t have come at a more opportune time for the Japanese
car companies, especially when political pressures are intense to reduce the
Japanese trade surplus with the United States. The task was made easier due to
the strength of the Japanese yen, which has risen about 50 percent against the
U.S. dollar. That has made production of cars in the United States cheaper, by
some estimates, by $2500 to $3000 per car. That saving more than compensates
for the transportation costs for a car overseas. For the first time, Toyota is
creating a system that will give it the capability to manage the car production
levels in Japan and the United States. It is moving toward a global
manufacturing system that will enable it to enhance manufacturing efficiency by
fine-tuning global production levels on a quarterly basis in response to
economic conditions in different markets.
Questions:
- Discuss the strategies implemented
by Toyota and Honda to achieve greater efficiency in car production.
- How do the automobile companies
plan to simultaneously manage risk and gain efficiencies?
- Discuss how the car companies use
national differences to gain a strategic advantage in the global car
industry.
Case
2: Can Little Fish Swim in a Big Pond? Strategic Alliance with a Big Fish
Globalization and the Internet have
created unprecedented opportunities for small and medium-sized businesses in
Canada – an environment where competition is fierce. To take advantage of these
opportunities, while avoiding some of the competitive obstacles often faced by
the little fish in the big ocean, many of these businesses are forming
partnerships or, more precisely, strategic alliances.
“There are various advantages to
forming strategic alliances,” says Estelle Metayer, president of Montreal-based
Competia Inc., a leading competitive intelligence and strategic planning
company and publisher of Competia Online. “One is the ability to penetrate
markets that would be too costly to develop on your own. For example, if you
form an alliance with an America partner who can take on your products and
distribute them through their network, you could save a lot of money on the
marketing side.” Another big advantage comes from joining forces with a
business that can provide your enterprise with access to expensive technology
you might not be able to afford otherwise.
Management-based strategic alliances
are also advantageous, Ms. Metayer says. “Often, smaller companies don’t have
big management teams. So if they need someone who has a certain expertise, but
they really can’t afford to hire such a person, then they can form an alliance
with a company that has that management expertise.”
Forming an alliance with a larger
company is sometimes the only way to have access to the type of capital and
resources they need to be able to grow, says Gary Shiff, a partner at the
Toronto-based law firm Blake, Cassels & Graydon LLP. “For example, we have
a client, a very small company of two people, and the only way it could get its
product into the marketplace was to establish an alliance with a large company,
which it did. The large company will give them a large sum of money. In return,
our client will give up a lot of its equity – it will only own 30% or 40% --
but over time, if the product is successful, our client can repurchase some of
that equity,” Mr. Shiff says.
Strategic alliances also benefit the
big companies. “With large corporations, one of the problems often is the
inability to move quickly, because of bureaucracy and more complicated internal
politics. Smaller companies are able to react more quickly to changes in the
marketplace. So from both parties perspectives, it serves their needs,” he
says.
Although the concept of a strategic
alliance can sound so appealing to a struggling small business that they might
be tempted to run out and get one, experts warn businesses should not rush into
partnerships, especially if another company comes courting.
“As a small company, we get five or six
requests for alliances a week from companies I don’t know anything about, and
suddenly they want to form an alliance. So my advice is not to rush into an
alliance. You have to be proactive,” Ms. Metayer warns.
The first step is to examine your
business and determine what gaps need to be filled. “Say I’m a small company
that is in textile products and I’m finding that to penetrate the U.S. market,
I need to be very close to a furniture manufacturer, since they are the ones
who will use my textiles. I might want to build an alliance with a big player
in the U.S. , and thus be able to penetrate the large distribution channels.”
Once need is determined, the search for
a partner can begin. “Alliances don’t work when you don’t know each other
well,” Ms. Metayer says. Thorough research of a potential partner is critical.
Check out a potential partner’s current viability, look into the company’s
management style to see if it is compatible with yours, contact former
partners, current and past clients and suppliers. “The way a company treats its
suppliers can be indicative of how they will treat their partner.”
She also suggests a small business
position itself as a client of a potential partner, to experience how the
candidate treats its clients. Even after thorough research, do not rush into an
alliance, she says. “Do a project together, for example, work together so you
can really see if it works before you go on a larger scale. You also need to
make sure legally you have a very tight agreement, in particular one that
allows the alliance to dissolve easily. If it doesn’t work, you need to make
sure you’ve planned for that.”
Besides legal advice, businesses
entering into an alliance should seek out professional accounting advice, Mr.
Shiff says. “A strategic alliance will have tax implications, and those tax
issues need to be addressed right at the beginning.”
While rushing into an alliance can
court a nasty breakup, choosing a partner that is so similar it could be a
competitor is courting disaster, Ms. Metayer and Mr. Shiff concur.
“Go back to the example of the textile
business—if you build an alliance with someone who builds the frames for the
chairs, you’re never going to compete. But if you form an alliance with someone
in the U.S. who also makes upholstery textile, eventually one or the other is
going to say, ‘hey, I can do this by myself,’” Ms. Metayer says. The last thing
any company needs is a rival who has intimate knowledge of its internal
operations.
Questions:
- Why would small companies want to
form alliances with much bigger companies?
- What risks do small companies face
in forming such alliances?
- Discuss how a company should
approach the opportunity to form an alliance with another company.
Case
3: The new Organizational Structure of Sumitomo Mitsui Financial Group
Sumitomo Mitsui Banking Corporation
[SMBC] announced its plan for the organization structure of Sumitomo Mitsui
Financial Group (SMFG), the holding company, which will be established on
December 2, 2002. It also announced its plan for the reorganization of SMBC’s
head office, which will become effective on December 2, 2002.
SMFG will be responsible for corporate
strategy and management, resource allocation, financial accounting, investor
relations, IT strategy, nomination of executives, risk management and audit of
the group as a whole with ten departments as follows: Public Relation
Department, Corporate Planning Department, Investor Relations Department,
Financial Accounting Department, Subsidiaries & Affiliates Department, IT
Planning Department, General Affairs Department, Human Resources Department,
Corporate Risk Management Department and Audit Department. The Risk Management
Committee, Compensation Committee, and Nominating Committee will be established
within the Board of Directors and be responsible for supervising the operations
of the Group as a whole. Regarding the Organizational Revision of SMBC, the
following changes will be instituted:
An Asset Restructuring Unit will be
established and the following departments will be integrated into the Unit in
order to focus further on reengineering and restructuring of SMBC’s corporate
customers businesses. This realignment will accelerate the improvement in the
SMBC’s loan portfolio in advance of the implementations of the New Basel
Accord:
(a)
Credit Administration
Department (Transferred from Corporate Service Unit)
(b)
Credit
Department I and II (Transferred from
Middle Market Banking Unit)
(c)
Credit
Department II and III (Transferred from
Corporate Banking Unit)
Talented staff with essential know-how
for corporate revitalization, such as securization, debt-equity swaps, and DIP
(Debtor in Possession) finances, and those with accounting and legal expertise
from throughout SMBC will be gathered under the Planning Department of the
Asset Restructuring Unit in order to strengthen SMBC’s commitment to
rengineering and restructuring of its corporate customers’ businesses.
Regarding the reorganization of
Existing Departments, in the Corporate
Staff Unit, the Investor Relations Department of SMBC will be abolished and
the Investor Relations Department of SMFG will have a comprehensive
responsibility for the Group’s investor relations activities. The Portfolio
Management Department, Market Risk Management Department, and Kobe General
Affairs Department will be abolished and functions of these departments will be
transferred and consolidated into their related departments. The Equity
Portfolio Management Department will be placed under the Financial Accounting
Department. In the Corporate Service Unit,
the Operations Planning Department will be reorganized to reflect the
completion of adjustment and integration of operational processes after the
merger. The International Market
Operations Department and Settlement & Clearing Services Department within
the Operating Planning Department will be abolished and a new department,
Operations and Administration Department, will be responsible for managing the
Group’s operational subsidiaries.
The E-Business Planning Department will
be integrated into the Electronic Commerce Banking Department along with the
Investment Banking Unit’s e-Business, Media and Telecom Department, and the
e-Business Patent Department will be abolished and some of its functions will
be transferred to the Corporate Staff Unit’s Legal Department. In the Internal
Audit Unit, the Audit Department and Inspection Department will be merged and
become Audit Department, and the planning function of the Group’s entire Audit
Department will be transferred to SMFG. The Audit Departments for the Americas
and for Europe will be integrated as part of the Internal Audit Department and
Credit Review Department, strengthening their functions.
In the Consumer Banking Unit, the
Products & Marketing Department will be reorganized into the following
three departments: Financial Consulting Department (responsible for advisory
businesses for investment products such as mutual funds, foreign currencies
deposit; and insurance); Consumer Loan Department (responsible for businesses
such as housing loans); and Consumer Finance Department (responsible for
business such as personal loans, personal short-term deposits, and settlement).
In the Middle Market Banking Unit, the
Kobe Public Institutions Banking Department will be integrated into the Public
Institutions Banking Department in order to unify and fortify the promotion of
business to the public institution market. The Credit Department I and Credit
Department II, in charge of credit monitoring in the eastern region of Japan,
will be merged to form a new Credit Department I, and the Credit Department III, in charge of the
western region, will be renamed Credit Department. The Operations & Systems
Department will be abolished and certain functions will be transferred to the
Branch Operations Department of the Consumer Banking Unit. The Business
Reengineering Department and New Business Promotion Department within the
Business Promotion Department will be abolished and the Business Promotion
Department will become directly responsible for their functions.
In the International Banking Unit, the
Asia Pacific Department will be abolished and its planning and administrative
functions concerning office operations in Asia will be transferred to the
Planning Department. The Operations & Systems Department will be
reorganized and become Systems Department. In the Investment Banking Unit, the
Syndications Department will be integrated into the Securitization &
Syndication Department. Certain functions of the Securitization &
Syndication Department will be transferred to a new department. Structured
Finance Department, which will be established to promote business such as
project finance, real estate finance, lease finance, insurance finance, and
management/ leverage-buy-out finance. The Asset Management Planning Department
will be abolished and its functions for
defined contribution pension funds will be transferred to the Corporate
Employees Promotion Department of the Consumer Banking Unit.
 |
| Siemens faces challenges in the global marketplace. The company will likely require a different leadership style than Von Pierer’s to face these challenges. What style would you recommend to Siemens |
Questions:
1.
Why is
Sumitomo Mitsui Banking Corporation changing its organization structure?
2.
What type
of structure is Sumitomo Mitsui Banking Corporation implementing? What are the
main characteristics of the design?
3.
In your
opinion, does the proposed structure fit with the global environment in which
the company is operating? Why or why not?
Case
4 conflict Resolution for Contrasting
Cultures
An American sales manager of a large
Japanese manufacturing firm in the United States sold a multi-million-dollar
order to an American customer. The order was to be filled by headquarters in
Tokyo. The customer requested some changes to the product’s standard
specifications and a specified dead-line for delivery.
Because the firm had never made a sale
to this American customer before, the sales manager was eager to provide good
service and on-time delivery. To ensure a coordinated response, she organized a
strategic planning session of the key division managers, that would be involve
in processing the order. She sent a copy of the meeting agenda to each
participant. In attendance were the sales manager, for other Americans, three
Japanese managers, the Japanese heads of finance and customer support, and the
Japanese liaison to Tokyo headquarters. The three Japanese managers had been in
the United States for less than two years.
The hour meeting included a
brainstorming session to discuss strategies for dealing with the customer’s
requests, a discussion of possible timelines, and the next steps each manager
would take. The American managers
dominated, participating actively in the session and discussion. They proposed a
timeline and an action plan. In contrast, the Japanese managers said little,
except to talk among themselves in Japanese. When the sales manager asked for
their opinion about the Americans’ proposed plan, two of the Japanese managers
said they needed more time to think about it. The other one looked down, sucked
air through his teeth, and said, “It may be difficult in Japan.”
Concerned about the lack of
participation from the Japanese but eager to process the customer’s order, the
sales manager sent all meeting participants an e-mail with the American
managers’ proposal and a request for feedback. She said frankly that she felt
some of the managers hadn’t participated much in the meeting, and she was clear
about the need for timely action. She said if she didn’t hear from them within
a week, she’d assume consensus and follow the recommended actions of the
Americans.
A week passed without any input from
the Japanese managers. Satisfied that she had consensus, she proceeded. She
faxed the specifications and deadline to headquarters in Tokyo and requested
that the order to be given priority attention. After a week without any
response, she sent another fax asking headquarters to confirm that it could
fill the order. The reply came the next day: “Thank you for the proposal. We
are currently considering your request.”
Time passed, while the customer asked
repeatedly about the order’s status. The only response she could give was that
there wasn’t any information yet. Concerned, she sent another fax to Tokyo in
which she outlined the specifications and timeline as requested by the
customer. She reminded the headquarters liaison of the order’s size and said
the deal might fall through if she didn’t receive confirmation immediately. In
addition, she asked the liaison to see whether he could determine what was
causing the delay. Three days later, he told her that there was some resistance
to the proposal and that it would be difficult to meet the deadline.
When informed, the customer gave the
sales manager a one-week extension but said that another supplier was being
considered. Frantic, she again asked the Japanese liaison to intercede. Her
bonus and division’s profit margin rested on the success of this sale. As
before, the reply from Tokyo was that it would be “difficult” to meet the
customer’s demands so quickly and that the sales manager should please ask the
customer to be patient.
They lost the contract. Infuriated, the
sales manager went to the subsidiary’s Japanese president, explained what
happened, and complained about the lack of commitment from headquarters and Japanese
colleagues in the United States. The president said he shared her
disappointment but that there were things she didn’t understand about the
subsidiary’s relationship with headquarters. The liaison had informed the
president that headquarters refused her order because it had committed most of
its output for the next few months to a customer in Japan.
Enraged, the sales manager asked the
president how she was supposed to attract customers when the Americans in the
subsidiary were getting no support from the Japanese and were being treated
like second-class citizens by headquarters. Why, she asked, wasn’t she told
that Tokyo was committed to other customers?
She said: “The Japanese are too slow in
making decisions. By the time they get everyone on board in Japan, the U.S.
customer has gone elsewhere. This whole mess started because the Japanese don’t
participate in meetings. We invite and they just sit and talk to each other in
Japanese. Are they hiding something? I never know what they're thinking, and it
drives me crazy when they say things like ‘It is difficult’ or when they suck
air through their teeth.
“It doesn’t help that they never
respond to my written messages. Don’t these guys ever read their e-mail? I sent
that e-mail out immediately after the meeting so they would have plenty of time
to react. I wonder whether they are really committed to our sales mission or
putting me off. They seem more concerned about how we interact than about
actually solving the problem. There’s clearly some sort of Japanese information
network that I’m not part of. I feel as if I work in a vacuum, and it makes me
look foolish to customers. The Japanese are too confident in the superiority of
their product over the competition and too conservative to react swiftly to the
needs of the market. I know that headquarters react more quickly to similar
request from their big customers in Japan, so it makes me and our customers
feel as if we aren’t an important market.”
Said the U.S.-based Japanese: “The
American salespeople are impatient. They treat everything as though it is an
emergency and never plan ahead. They call meetings at the last minute and
expect people to come ready to solve a problem about which they know nothing in
advance. It seems the Americans don’t want our feedback; they talk so fast and
use too much slang.
“By the time we understood what they
are taking about in the meeting, they were off on a different subject. So, we
gave up trying to participate. The meeting leader said something about
time-lines, but we weren't sure what she wanted. So, we just agreed so as not
to hold up the meeting. How can they expect us to be serious about
participating in their brainstorming session? It is nothing more than guessing
in public; it is irresponsible.
“The Americans also rely too much on
written communication. They sent us too many memos and too much e-mail. They
seem content to sit in their offices creating a lot of paperwork without
knowing how people will react. They are so cut-and-dried about business and do
not care what others think. They talk a lot about making fast decisions, but
they do not seem to be concerned if it is the right decision. That is not
responsible, nor does it show consideration for the whole group.
“They have the same inconsiderate
attitude toward headquarters. They send faxes demanding swift action, without
knowing the obstacles headquarters has to overcome, such as request from many
customers around the world that have to be analyzed. The real problem is that
there is no loyalty from our U.S. customers. They leave one supplier for
another based solely on price and turnaround time. Why should we commit to them
if they aren’t ready to commit to us? Also, we are concerned that the sales
force has not worked hard enough to make customers understand our commitment to
them.”
Questions:
1. How are
the managers of the Japanese manufacturing firm different from the American
managers in the way they approach conflict resolution and decision making?
2.
Why do
the Japanese consider the Americans managers impatient?
3.
What
would you do to increase the amount of cooperation between the two parties?
4.
Why did
the Japanese not respond to the e-mails and written messages from the
Americans?
Case
5 All Eyes On the Corner Office
After more than a decade at the head of
Siemens, the icon of German industry, Chief Executive Heinrich von Pierer is
something of an icon himself.
In 2003, his name was floated briefly
as a candidate for the German presidency. After years of investor criticism
that he moved too slowly to transform the $93 billion electronics conglomerate
into a global competitor, von Pierer is getting the last laugh. While
competitors such as Netherlands-based Philips Group suffered losses during the
recent economic downturn, Siemens remained profitable. The share price had
doubled over the past year, to almost $87 on the New York Stock Exchange. “He
has done good work,” allows shareholder advocate Daniela Bergdolt, a Munich
lawyer who once told von Pierer at a stockholders’ meeting that he should leave
the company.
Now Bergdolt is worried about what will
happen when von Pierer does just that. The 63-year-od executive’s contract
expires in September. He is widely expected to accept a two-year extension, but
the question of who will succeed one of Germany’s most important executives is
fast becoming a hot topic in Germany—and elsewhere in Europe, where a new
generation of CEOs is fast taking over. The race to succeed von Pierer, in
fact, has already started in earnest. Von Pierer and Siemens supervisory board
members are now closely watching a handful of candidates. Front-runners include
former U.S. division chief Klaus Kleinfeld and Thomas Ganswindt, who runs the
fixed-line telecom equipment business.
The oddmakers currently favor
46-year-old Kleinfeld. Last November, he was promoted to the seven-member
central committee of the management board in recognition for his work as CEO of
Siemens’ $20 billion U.S. operations from January, 2002, until December, a post
seen as good training for the top slot. Like Siemens worldwide, the U.S.
operations are a collection of fiefdoms that often need to be strong-armed into
cooperating. But there are other credible candidates, including 47-year-old
Johannes Feldmayer, another central committee member.
Whoever prevails, a new generation of
managers is already moving into Siemens’ top echelons. In just a year, the
average age of top management has fallen from 58 to 53, J.P. Morgan Chase &
Co. calculates. While rising fortysomethings won't foment revolution at
consensus-driven Siemens, they are likely to speed the company’s shift away from
its conservative German roots. The new managers will focus more intensely on
profit, move faster to unload underperforming units, and shift more production
to cheaper locations abroad. “Obviously, von Pierer will be a tough act to
follow,” says Henning Gebhardt, head of German equities at DWS, the fund management
arm at Deutsche Bank. “But after 10 years, sometimes a change at the top is
good.” von Pierer wrought mighty changes, even if his slow-but-steady pace
didn’t always satisfy investors. When he took over in 1992, Siemens relied
heavily on government contracts, rarely disciplined managers who delivered poor
results, and employed 61% of its workforce in high-wage Germany. Transparency?
The company published no profit figures for its divisions, and often even
employees didn’t know if their units were making money.
POLITICIAN’S TOUCH. Now Siemens gives detailed company and
divisional results quarterly and has sacked numerous underperforming managers.
Net return on sales has risen from 2.4% in 1993, the year after von Pierer took
charge, to 4% in the latest quarter. Von Pierer responded to criticism that
Siemens, which makes everything from locomotives to X-ray machines, had too
many moving parts. He spun off dozens of units, including chipmaker Infineon
Technologies and the electronic components unit known as Epcos. Now, 60% of
employees work outside Germany and the domestic workforce has been cut by a
third, to 167,000. Von Pierer, an engineer with a politician’s touch, managed
that without provoking extensive labor unrest—no small feat in a land where layoffs
are deemed unpatriotic.
The new generation of managers, though,
is likely to be more willing to bust heads. Consider the way Ganswindt turned
around the company’s $8.9 billion Information & Communication Networks
division. He cut the workforce by nearly 40%, or 20,000 workers, to reduce
costs by $4.4 billion. He shifted production to Brazil and China. From a loss
of nearly $865 million in the fiscal year that ended Sept. 30, 2002, ICN returned
to a profit of $64 million in the last quarter.
Despite the improvements, Siemens still
gets heat for mediocre margins. Ganswindt and the other young managers are
sensitive to the criticism. “You can't innovate if you don’t have money to
invest,” he says.
Rising managers will also continue
pushing the engineer-dominated company to focus more on customer’s needs. They
will maintain Siemens’ steady drive to globalize—not only by investing in Asia
and the Americas but also by importing non-German ways of doing business back
to Munich.
There is no question, however, of
Siemens transforming itself into something other than a German company. “A new
CEO will mean change, but I don’t expect a radical departure from the existing
philosophy and strategy,” says analyst Roland Pitz of HVB Group in Munich. The
fear is that some company directors will try to keep things too German. The
supervisory board could name a lower-profile candidate such as Kurt-Ludwig
Gutberlet, head of BSH Bosch & Siemens Household Appliances, a profitable
joint venture with Stuttgart-based Robert Bosch. “It could be someone who is
not the strongest but has the strongest consensus among the gray heads,” says a
source who works closely with Siemens. Still, it’s clear that at Siemens, gray
heads are becoming ever more scarce.
Questions:
1. What
leadership skills have contributed to the success of the incumbent CEO,
Heinrich Von Pierer? Describe his leadership style.
2.
Siemens
faces challenges in the global marketplace. The company will likely require a
different leadership style than Von Pierer’s to face these challenges. What
style would you recommend to Siemens?
3.
Why would
the age of the leader be an important consideration in a global company? Would
it be important in your consideration of the candidates for CEO of Siemens?
Why?
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