Case Study: Siemens

Pages: 4 (1159 words)  ·  Bibliography Sources: 4  ·  Level: Master's  ·  Topic: Energy  ·  Buy This Paper

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[. . .] Should Siemens invest in a number of alternative energy technologies to ensure it has its hand in which ever one proves itself as most successful? This may seem like the best strategy because the market environment is so uncertain. However, this is not the case for Siemens. The company just underwent a major restructuring in 2008, "consolidating the number of sectors from more than one dozen down to just three -- Industry, Energy, and Healthcare" (Rothaermel & Hoepfer, 2010, p 283). It would be a step backwards to just undo all the work that was so recently done in order to restructure again with a model that obviously was not working for the company previously.

Instead, Siemens should focus on a more narrow net and invest into one particular field. This would allow the company to maximize the ROE on its investments made. Currently, the largest market share of alternative energy is biomass, which made up about 6% of the global energy sold in 2008 (Rothaermel & Hoepfer, 2010). However, there are more lucrative potential markets for Siemens, which has already begun the process of investing in wind energy technologies.

Wind turbine power is a source of energy that has been undergoing some major changes recently. According to the research, "modern windmills are high-tech devices capable of producing several megawatts of energy each, enough for one turbine to supply electricity to an entire small village" (Rothaermel & Hoepfer, 2010, p 288). They are extremely efficient at producing renewable power when used in the correct environment or circumstances. There have been major wind plant construction projects recently, showing proof of the energy source's success. As such, "wind power is deemed to have immense upward potential for at least the nest two decades" (Rothaermel & Hoepfer, 2010, p 288). It is thus a sound investment because of its high potential in the years to come. Therefore, "it is the fastest growing energy alternative sector, a trend that is predicted to continue" (Rothaermel & Hoepfer, 2010, p 289). Yet, wind power is extremely expensive to get started in, with high barrier entries (Rothaermel & Hoepfer, 2010). This would also justify the concept of Siemens investing heavily into only one technology, as it could not feasibly try to enter the wind power industry only partially.

Another reason why wind power would be the best choice for investments is because the company is already in a strong position in the market. Siemens has experience already, and so it can maximize its early start in the field to become one of the dominant players in the market environment. Here, "Siemens Energy builds wind turbines, claiming to have globally 1,800 megawatts of offshore wind capacity installed or on order as of late 2008. One major project off of Denmark's seacoast was its 2008 Rodsand II wind farm contract with E.ON to manufacture 90 wind turbines" (Stanat, 2010). Today, there are very few competitors in place already in the market, making Siemens' poised for market entry in a big way (Rothaermel & Hoepfer, 2010). Siemens can create an empire built on a renewable source early on and then carry that success far into the future. This also makes it unnecessary to acquire companies already in the market to capitalize on another's experience, which will ultimately keep more cash flow in the company's reported financials as well.

References

Rothaermel, Frank T. & Hoepfer, Matt. (2010). Siemens Energy: How to Engineer… [END OF PREVIEW]

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