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Interdependence Between NAFTA & International Strategy of Siemens AG

Sachiko Miyake, Anna Lee, Csar Martnez

NAFTA
RIA between Canada, Mexico and USA (1994) Liberalization of trade and investment flows Gradual reduction of trade tariffs, Complete eradication by 2008

PEST Analysis on NAFTA


Political
Formation of complimentary political organization and behavior* Democratic movements, empowerment of civil society capacity of less developed member country* Pressure to prioritize the group benefit over the domestic* NOTE: Kyoto Protocol in 1998*

Economical
Free competition, improved FDI opportunities and ease of market access by small-medium enterprises Phase-out of tariffs, unbiased cost benefits for all participants 1. Consumers perspective: better price 2. Enterprises perspective: higher profit margin 32.3% of USAs export goes to Canada and Mexico (2011) From 1993 to 2010; 218% increase on total merchandise trade FDI from USA to Canada and Mexico; 75% growth from 2003 to 2009 (624 bil.)

PEST Analysis on NAFTA


Social Virtually every country is involved in some form of RIA NAFTA population 1. In 1994: 363 millions 2. In 2009: 452 millions Age structure Median Age* 1. Canada: 41 years 2. Mexico: 27.1 years 3. USA: 36.9 years Technological Obamas 2012 budget plan: 1. Increase in governmental research on renewable energy by 70% 2. Increase in research and experimentation tax credit for companies by 20%* Boost in innovation potential of USA power generation industry

Siemens AG
High Quality Engineer and Export-orientation Present in more than 190 countries Energy / Healthcare / Industry / Infrastructure & Cities USA: the single largest market Siemens Energy: major and thriving profit generator Innovation, Economies of Scale and Complete Package of Services

History, Scandal and Awakening


Founded in 1874 in Berlin, Germany Bribery Scandal 2006-2008: - Damaged reputation and market value - 2.6 billion USD expenditure in fines and investigation fees Major reconstruction by a new external CEO, Peter Lscher

Peter Lscher

Trade Map: Siemens Energy

What is a gas turbine


Animation: http://www.energy.siemens.com/hq/pool/hq/ener gy-topics/videos/Siemens_SGT100_Animation.swf
1) 2) 3) 4) Compressor Diffuser Combustion chambers Turbine (blades)

Siemens Performance in NAFTA

International Strategy

Sectorial Profit Distribution (2011)

14%

40%

Industory Sector
Energy Sector Healthcare Sector

46%

Source: Siemens Global Website

Siemens Energy Revenue by Region (2011)


16%

28%

56%

Europe, C.I.S., Africa, Middle East Americas

Source: Siemens Global Website

Siemens in NAFTA Region


MEXICO
Active since 1894 Largest provider of mechanical energy Demand for sustainable energy

CANADA
Active since 1867 Hamilton plant in 1896 Whitby Cogeneration plant in 1998

USA
Active since 1854 100 + facilities Largest single national market

Performance in Mexico
Turnkey Contract to power plant, 2013 Cutting-edge turbines for maximum efficiency and ecological benefits

Performance in Canada
Gas Turbine factory in Hamilton since 1896 Shut Down in 2011

New Production
Line in Charlotte, USA

Performance in Canada
Cogeneration Plant in 1998

Combination of heat and power to generate electricity Higher efficiencies than other forms of power generation

Performance in USA
$350M Investment in new plant in Charlotte, USA,2011 Expansion of the steam turbine manufacturing plant 60 % Sold in USA 40% Sold outside

First two turbines to Mexico

Performance in USA
Increasing Demand for Cleaner Power Plant Charlotte as a Hub for North American Market Economics of Scale, logistical Cost

Siemens Multinational Strategy


Strategy Worldwide Markets Transnational Yes International Yes Multidomestic No Regional No

Worldwide location of Separate Value Chain Activities


Global Products Global Marketing

Yes

No

No

No

Yes Yes

Yes Yes

No No

No No

Global Competitive Moves

Resources from any country used to attack or defend

Slight strategic variation but identical resource from HQ

No

No

Trade analysis
Year
1990 $ 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

GDP
6,314,596.09 6,539,127.13 6,907,278.43 7,255,414.04 7,710,196.68 8,025,043.28 8,486,927.15 9,056,091.80 9,590,308.20 10,195,136.64 10,885,912.91 11,243,060.32 11,637,910.70 12,197,978.00 12,984,034.82 13,858,088.12 14,753,799.29 15,492,639.76 15,846,367.94 15,410,506.60 16,093,164.39

Tariffs (%) (US-MX)


5 5 5 5 5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 $

Exports
13,045.00 7,281.00 9,697.00 5,595.00 9,854.00 4,615.00 8,969.00 87,801.00 123,464.00 53,446.00 100,247.00 202,575.00 171,690.00 87,429.00 35,039.00 143,279.00 55,135.00 74,093.00 61,629.00 103,860.00 82,877.00

$250,000.00

$200,000.00

Exports

$150,000.00

$100,000.00

$50,000.00

$$$5,000,000.00 $10,000,000.00 GDP $15,000,000.00 $250,000.00 $20,000,000.00

y = 55,560 + 0.003*GDP - 12,893.11*Tariffs


$200,000.00

Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.598 0.357 0.286 49,039.159 21.000
Exports

$150,000.00

$100,000.00

$50,000.00

$0 1 2 3 Tariff 4 5 6

Conclusion
NAFTA AFFECTS SIEMENS INT. STRATEGY GDP growth & 0% T Transnat. Strategy Differentiation MX emerges as KEY profit provider
Synergy: NAFTA & Mining

Keep spending on R&D to be the leader

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