Abstract
Research reveals that contemporary businesses are increasingly faced with dilemmas in making business decisions; such decisions can take the form of a decision to attract new clients as well as maintaining old customers. It is for this reason that two or more business units join forces in terms of joint ventures to boost their business growth as well as to remain prospective and successful in the current business environment which is becoming dynamic day in day out. Further research indicates that competition has become the modern norm of survival in this twenty-first century and Siemens, as well as Fujitsu, have not been exceptional from such business rivalry. It is therefore an ideal decision by firms to form joint ventures and other strategic alliances to remain competitive as well as global in the quest for business scope.
It cannot be denied that with such strategic alliances like joint ventures businesses are evolving through the utilization of modern technologies like personal computers and mobile phones and therefore they meet the needs and desires of their customers which also change with time particularly with the emergence of technology. Firms enter into joint ventures and mergers to exploit the potential opportunities by utilizing their existing strengths as well as to avoid potential threats by working on their weaknesses in their business context.
Introduction
Fujitsu and Siemens Forming a Joint Venture
A joint venture or commonly referred to as JVs in essence is a kind of entry into the market that provides an opportunity to share several resources such as technology, ideas, capital and labor among other factors. Research reveals that joint ventures are commonly associated with political linkages that in the long run will lead to business prosperity in the target market. When an organization indulges in a joint venture then it boosts its market power, it will be able to meet the demands in that particular region. Before entering into joint ventures the respective companies wishing to form such business will have to critically look at some of the issues that comprise; management and control of the joint venture, duration of the joint venture, the available advancements in the modern business world and terms of the agreement among other factors that will ensure the smooth running of the resulting joint venture. Many marketers who have been in the business of international marketing for a long time believe that more than one mode of international marketing is suitable for a company. Companies such as IBM have in the past employed multiple joint ventures, direct exporting and indirect methods, franchising etc to meet the requirements of its customers. The choice of a particular method depends on many factors; the capital base available, the number of customers, the efficiency of reach, the government regulations and laws, protectionism and the number of competitors in that country.
Fujitsu Limited and Siemens AG came together to form one of the world’s largest computer companies the Fujitsu Siemens Computers with its headquarters based in Amsterdam and the Netherlands with its home market-based in Europe. The announcement made in 1999 saw the two companies have a share of 50% each in the company’s infrastructure. The new partnership was designed to be operational on the 1st of October 1999 the saw the firms combining their portfolios to offer advanced information technology products and services. Individual financial performance, services and products offered by each company differ and therefore the joint venture is expected to incorporate not only the services but also the strategies used by both Fujitsu and Siemens to improve its computer business. According to the Frankfurt /Tokyo business wire it was announced that in the year 1919,The agreement between the two companies forming a European joint venture in their Netherlands offices was completed through which various management teams were created. Looking at the individual companies, a lot has been done by the two in terms of technologies, skills, human resources and infrastructure. (Frankfurt/Tokyo Business Wire, 1999)
Siemens Company
Siemens is an electronic and Telecommunication Company located in Berlin and Munich, Germany It is considered one of the greatest and successful companies of all time with well over 461,000 employees and millions of employees in over 190 countries according to 2006 estimates. Siemens has been active in many areas of electrical, communication, construction, medical and transportation sectors.
The main business that the company engages in is the communication sector. It offers products, services, and other solutions for industries adopting ICT technology in their day to day running of their businesses. Siemens also provides a range of power and lighting products such as electronic control gear, opt semiconductors, lamps etc. Medical and franchising and real estate businesses have provided a wide range of business spectrum for the company. The provision of integrated technologies, innovations and therapeutic services has taken the popularity of Siemens to higher levels. (Frankfurt/Tokyo Business Wire, 1999).
Strategies
Siemens has strived to grow in its business as the world’s leading telecommunications and electronic company. Its main goal states that it endeavors to maintain a strong but conservative financial position through the implementation of new marketing strategies. With careful management of its net working capital, the company intends to strike a good financial objective soon and one of them is the new joint venture with the Fujitsu Company. Through research and development, this company has developed innovations in the past making it a global prowess. Currently, the company holds to its name a whooping 53,000 patents including numerous licensing agreements around the world making it the most innovative company of the century. It was estimated by an annual world report that Siemens in technology and innovation is ranked among the top ten companies in the U.S, the best in Germany and second in Europe. (Fujitsu Siemens Computers, 2009).
This growth is attributed to recent transactions undertaken by the company. The most significant one was a breakthrough in the energy sector in which the company acquired CTI Molecular Inc. of the U.S (a wind power company) and Bonus Energy A/S (Bonus) of Denmark in 2005 and 2004 respectively. The company was interested in acquiring the two companies because of the lucrative potentially and fast growth in the energy sector. The company also continued its support for the automation portfolio in the industrial and manufacturing sector by further acquiring a locally based industrial gear manufacturing company in Germany- the Flender Holding GmbH-, the U.S based Robicon Corporation that deals with the manufacture and distribution of voltage converters. Acquisition of VA technologies of Austria in mid-2005 helped Siemens to consolidate its strategies in the industrial engineering and power distribution business
Fujitsu Company
From the JCN Newswires, we find that Fujitsu is regarded as a leading IT company based in Europe. This company is reported to have strategically focused on its generational mobility and businesses concerning its computer products and services the company has been diverging across other fields of businesses and currently it engages in;
- Development of various solutions concerning the computer business that has enabled it to be competent enough in the provision of the best technologies, software and computer services world wide
- Supply of computer equipments and solutions in various markets such as Europe, Africa and Middle east
Strategies
The company has in the past developed business models, marketing strategies and new innovations in the computer industry. Its main goals and objectives have been to;
- Meet specific needs for of diverse market for their products
- Maintain economies of scale
- Augmenting productivity as well as maintaining efficiency and effectiveness in the production process.
Fujitsu main action plan is to exploit the personal computer market in order to enhance its survival and business success in the future. Market and customer operations have for a long time supported the various business groups available in the company. The other horizontal entity that has provided enough support for the business groups is the new technology platforms created to allow for the management and driving force for Fujitsu Siemens products. The company has also been able to implement strategic channels that allow the various enterprises whether small or medium sized to be served by the company. The company offers the following products to its consumers: notebooks, workstations, servers based with Intel and UNIX, the company also offers various mainframes and tools for storage (JCN Newswires, 2008)
Potential problems Fujitsu Siemens Company
When Negotiating the Agreement
Experts in the computer industry have predicted that there will be a major battle for the Asian markets particularly in Europe. This has been attributed to the fast growing economies of these countries. With a sizeable market and subscriber base, the companies will have a potentially huge market for their services and products to accompany the needs for the fast growing sectors of the economy such as industrial development, manufacturing, telecommunication, medical, education sectors among others (Fujitsu Siemens Computers, 2009)
During The Initial Period of the Joint Venture
The joint venture between Fujitsu Company and Siemens will meet harsh business challenges in the various countries; it has developed a strategic position to counter it. The joint venture aims to cut down prices for its services and products using entry price criteria. This will ensure that the existing companies will be forced to put up their prices or down to remain in business. Either way, however will pave way for the Fujitsu Siemens Company to gain a clear market share for its products and services. Since the joint venture is not the only company to try the computer market, it is aware of efforts done and being done by companies such as Dale and IBM being the competitors of the company. (Fujitsu Siemens Computers, 2009)
These developments have put a lot of pressure for ‘smaller’ companies to merge in order to improve its market share. All these companies competing for the computer market is doomed to face harsh realities. First, they have been contented with low profit margins and high competition rates. Secondly, the increased need for massive investments in terms of upgrading available networks and development of new products which require lots of initial capital by the companies. That notwithstanding reflects the growing interest for the European market by global companies especially in the next three years.
The Principle of Tax Morality
Research indicates that the Fujitsu Siemens Company FDI has had the direct ownership of processing, manufacturing or assembling facilities in a target country by a mother company. Research reveals that The Company has utilized the modern concept of globalization and expanded its market share to various markets all over the world in order to boost its business operations. This implies that the company have had to comply to tax regulations of various countries in order to remain operational. The resources include; technology, personnel and capital. In essence the joint venture business have used the local resources in the target markets such as employees and capital requirements; such resources implies that taxes must be remitted to the government for instance, value added tax on capital equipments purchased as well as taxes levied on employed individuals such as pay as you earn taxes which the company has had to remit it to the respective tax authorities in the target markets. It is also possible for the company to set up its own company and start manufacturing the products directly. In this case we find that company has been applying the taxation principles in various countries that the company exist. There has been the application of international taxation on this company. The company has been reported to be adhering to various tax laws such as the taxes imposed on the corporate income, the indirect taxes and the tax incentives. (Mowery and Rosenberg, 1989)
Monetary and fiscal policies
Monetary policies are outlined programs that are used in the regulation of circulation of money in the economy. While, fiscal policies; are regulations undertaken by the government, to control tax collection and its spending in order to attain economic goals. Under monetary policies, the industry has continued to face poor policy framework in many countries, in many countries importation of technological parts is restricted or highly taxed because, money government view technology products such as phones and computers as luxuries. (Agre and Rotenberg, 1998)
The procurements procedures of these products are normally cumbersome. In many cases private organization lack access to important public data resources, policies on legal protection of technological products like software is weak and most governments don’t focus on technology improvement strategies. Under fiscal policies, many countries revenue collection from the industry, thus, there have been significant increases in taxes in the industry. Tax collection in the industry has improved and many governments are able to get a substantial amount of money in terms of taxes from the industry (Mowery and Rosenberg, 1989)
The Impact of Tax in Strategic Management Decisions
Negative economic influence
The industry is likely to suffer from negative economic influence brought about by government and political interventions. The government policies on taxes controls, exchange controls, import restrictions, regulations of market, price control and domestication will adversely affect the industry. For instance, tax controls; the government may increase the tax on parts or machines produced in the industry, which will imply that production cost will go high this may impede, the consumers from by the product hence reducing revenues in the industry. In another way, the government may impose restrictions on imports. This will mean that essential parts required for assembling some products will not be able to reach a particular country. This will hinder the production of certain products thus adversely affecting the industry. (Cullen and Boteeah, 2005).
Another related economic influence to the government policies is political stability of a country, for any business to grow they should be stability in a region or a country to ensure security for investors to be able to invest in the region. War, strikes and violence in a country will hinder the industry development. Other economic factors that will affect the market negatively are high cost of the labour; increase in interest rates, fluctuations in exchange rate and economies of scale. An increase in one of these factors directly results in increase in production cost which reduces revenues of the companies and hence development of the industry. (JCN Newswires, 2008).
Rationale behind the fall out
The basic rationale that made Siemens quit the joint venture is the fact that mobile phones are now increasingly gaining the market share than personal computers. Research reveals that with advancement in technology there is more demand of mobile phones than personal computers; this is because mobile phone technology is on a rampant invention i.e. with advances in technology the uses of mobile phones by individuals can now be said to be replacing the uses of personal computers. For instance, one can surf via mobile phone which is a faster and convenient way than when using personal computers; the later involves using a lot of processes and connections in order to surf or browse. (Cullen and Boteeah, 2005)
Many business oriented individuals are now utilizing online marketing is based on the technology of internet and the usage of mobile phones.
The Potential impact of supply Chain partners
On the other hand, suppliers take advantage of their unique supplies to ask and bargain for what they want and enjoy the monopoly and charge expensively for the products or services that they offer. Customers are very sensitive to any changes that may affect them that are caused by the bargaining power of the suppliers. Suppliers are a competitive threat in both mobile telephony and personal computer industries because they can raise the prices of new and the old supplies and therefore making the customers to try substitute products that can satisfy the same need. (JCN Newswires, 2008).
The implications for Fujitsu
Suppliers may cost the Fujitsu Company a lot of financial constrain if they switch and fail to supply their products as it is involving to get new and reliable suppliers that can give quality and be efficient all the time; in this case Siemens Company. (Philip, 1996).
For instance suppliers will have more power if they are few or alone in the market and will give their products at a very high price and will affect the sales of the Fujitsu in the long run. Siemens will be involved in a more profitable market than Fujitsu since the determinants of the suppliers power in both the mobile telephony and Personal Computer industries depends on: suppliers concentration in one particular place that is central in location, volume of suppliers that they offer to the market and finally the costs related to the total purchases that they do. (Agre and Rotenberg, 1998).
The suppliers ensure that they take advantage of their strengths to bargain and register as much profits as possible and make the buyers of their suppliers to accept what they offer and fix high prices; this may imply that Fujitsu may not survive in the market for long because people are opting for mobile telephones rather than personal computers.
The company lost its market share as a result of a stiff competition in computer market; this is clearly indicated by the siemens company’s CEO Peter Loescher who claims that this happened as a result of a result of a poor performance of the business in the market whereby it is reported that the company sold its products at a cheaper price as a result of the existence of a weak dollar that led them sell the imported computers at a cheaper price. As a result this the company came up with a plan to restructure the company by creating job cuts in its subsidiaries whereby it had to improve its profit margins. The company had to reduce its workforce in its more than one hundred subsidiaries with over four hundred employees. Research indicates that in the year 2008 the siemens company was positioned itself in reducing its business unit from eight to three. On top of this we also find that the company had planned to merge the seventy regions of the company into twenty groups.
References
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