Siemens Corporation Case Solution

In: Business and Management

Submitted By yutingmandy
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Background:
Siemens Corporation is one of the world’s largest corporation focus on electrical and electronic products. The Electric motor works was the only factory survived after the War. At first, EMW mainly produced standard motors rather than customized motors, the market for standard motors was very competitive. The old strategy for Siemens for a very long time was producing a single-variety of motor to reduce cost and price aggressively. In spite of expanding the plant, EMW still cannot lower its costs to offset the lower labour rates. The competition became more fierce. By using the new strategy, EMW started to produce different varieties of motors in small production runs in order to get more profits. As a result, the standard components were replaced by customized components that was costly and automated by using dedicated automated equipment. To support the new strategy, EMW spent much money to replace almost every machine in the production line and therefore create a new manufacturing environment. Fortunately, the new strategy seems really works which changes its cost allocation system quite well and therefore help Siemens achieve success in the fierce competition of industry.

Identify problems and issues
Siemens Electric motor works plant has used traditional costing system for a very long time, although the operation is simple for managers to handle and resource-saving. It still brings lots of troubles as Siemens develops.
Nowadays, Siemens has been a multiproduct company, it forms a product mix, which is made up of standard motors and customized motors. Standard motors accounted for 80% of sales volumes while customized motors made up the remaining 20% by using traditional costing system. Under new costing system, 90% were for custom motors of total orders accepted, although high-volume standard motors still accounted for 50% of the total annual…...

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