Restructuring the Siemens Company Case Study Example | Topics and Well Written Essays - 2000 words

Restructuring the Siemens Company - Case Study Example There are a number of definitions of corporate restructuring ranging. Froud (2000) defines restructuring as the collective activities that involve the introduction of financial instruments, dissolution, increasing equity ownership and reduction of corporate assets. Usui (1996) defines restructuring as activities that a corporate engages in when under pressure, Bowman (1999) on the hand states that restructuring involves the reorganisation of division, streamlining of operations and spun offs with the aim of improving performance and restructuring is the utilisation of assets in a more productive way in order to improve share holder returns. Bowman (1999) states that there are three modes of restructuring which include portfolio restructuring, financial restructuring and organisational restructuring. Portfolio restructuring include those actions aimed at changing the asset mix owned by a firm and they include spin offs and sale of assets. Financial restructuring on the other hand are those actions aimed at changing the capital structure of a company and they include leveraged buyout and debt equity swap. Finally organisational restructuring involve changes in the organisation structure of the firm and they include redesigning and employee downsizing. Restructuring has both negative and positive impacts. Positive impacts include enhanced productivity, reduced production costs and increased shareholders' wealth and Negative impacts include lay offs. Bowman (1999) states that performance is determined by market performance and accounting performance. Market performance relates to change in the share prices of a company after restructuring while accounting performance relates to changes in profit, return on investment and equity. Restructuring in the Siemens Company: Restructuring of the company started in 1966 whereby the company the company organised its production into division and there was decentralisation of control, this was aimed at improving the response to consumer requirements, the division included data system, power engineering, electrical installation, medical engineering, components and electrical installations which all worked independently, Siemens (2009) states that sales during these years ranged at DM 10 billion a year and employment was approximately 270,000 employees. Further restructuring efforts were evident in the year 1969 when the company made it possible for employees to purchase shares at discounted prices. In 1990 further changes were implemented, the seven units were further divided into 15 units, (Siemens (2009)) Before 1990 over 60% of Siemens consumers were public institutions, this protected the company from fluctuating prices in the market and product prices remained relatively constant, privatisation of public institutions began in the 1990's and this led to a decline in domestic sales, because the domestic market was already saturated the company opted to expand its market size by investing abroad, in 1985 domestic sales amounted to 53% and only 10% in the US and by the year 2001 domestic sales am