For the Strategic Thinking: Strategic Evaluation and Analysis module, I choose to do my individual assignment on Siemens UK’s Rolling Stock business. This was a really interesting opportunity to be able to take a deep dive into the world of UK rail systems and infrastructure. Particularly, getting the chance to analyse one of the most complex business models I have come across, was a challenge that I felt excited to take on! In this article, I will go through the structure of the essay that I followed, highlighting key outcomes and useful resources.
Chapter 1. Case Study
The first part of the 2,500 word essay is the case study, where I introduce the UK rail system, the complex network’s strategic priorities and challenges, and Siemens Rolling Stock and Customer Service segment’s (SRS-UK) role within this dynamic.
“The UK rail network comprises of 20,000 miles of infrastructure, 2,500+ stations, 1.3 billion passenger journeys per annum and 190,000 employees across the supply chain network.”(Stagecoach.com, 2019)
I used the Product Portfolio (Slack and Brandon-Jones, 2018) tool, which was taught in the Operations Module, to illustrate the operational priorities of the rail industry, in order to identify strengths and challenges. I have used and adapted this tool in several essays, and I personally find that it is great for a quick visual illustration, instead of using up a paragraph and countless words! Here we can see, from the ‘peaks’, that safety, punctuality, speed, accessibility, coping with variation in demand, and adaptability to external conditions are all high priority factors. These need to be kept in mind, throughout the analysis and when suggesting strategic recommendations.
Chapter 2: PESTEL Analysis
The next section comprises of a comprehensive and systematic PESTEL analysis, which allows for the understanding of the political, economic, social, technological, environmental and legal influences on the rail manufacturing industry. Across the PESTEL factors, I explore the role of the UK government, the impact of Brexit and union strikes, economic restructuring, workforce needs, digital disruption, carbon emissions and energy consumption — the list is not exhaustive, and in fact formed majority of the appendices. From this, I could draw the following conclusions:
Chapter 3: Five Forces Analysis
Chapter 3 sees a systematic analysis of Porter’s Five Forces (Porter, 2008), which allows for the understanding of how new entrants, customers, suppliers, alternatives in the market, and the existing competition impacts SRS-UK’ operating environment. The Five Forces analyse the threat imposed by new entrants and alternatives into the current market, as well as assessing the supplier and customer bargaining power and therefore, the intensity of existing competition. The micro-analysis highlights the following:
“SRS-UK’s strong competitive forces, with supplier and customer bargaining power predicted to go from medium to high, propelling the existing competition to fight tougher to secure long-term contracts. The intensive competition impacts SRS-UK’s profit margins, with estimated 5% profit made on product and 10-12% on maintenance.”
Chapter 4: Resource Based View Analysis
Following the external analyses, a detailed internal analysis is crucial in identifying SRS-UK’s resources along its Service Value Chain (Jacobides and MacDuffie, 2013). A VRIO analysis determines the competitive implications of each core competency. I did this analysis using a table, where resources within Siemens was first identified and then analysed as being Valuable, Rare, Costly to Imitate and Exploited, following which a ‘Competitive Implication’ was attributed to the resource, such as Parity, Temporary Advantage and Sustainable Competitive Advantage.
For SRS-UK, I identified three areas of sustained competitive advantage, which could be leveraged to outline a strategic plan:
- Smart Infrastructure department in Siemens focusing on building efficient and sustainable energy systems, interlinking buildings, transportation and industries (Siemens UK, 2019).
- Technological Edge: SRS-UK have some of the fastest fleet, e.g. inner-city operative fleets go to 110mph (siemens.co.uk(b), 2019), and the Eurostar e320 international fleet goes to 219mph, the fastest in the UK (Sawe, 2018). A list of their cutting-edge technological expertise is on their website, e.g. automatic door opening, sleep mode energy saving, LED lighting, graffiti-resistant exteriors, adaptable interiors, etc (siemens.co.uk(b), 2019).
- TfL’s London DTUP: SRS-UK were awarded the DTUP contract (TfL(b), 2018), which involves the upgrade of 94 new trains in the Piccadilly Line, between 2023-2026. This will be followed by further upgrades, giving SRS-UK full exclusivity to engineer and deliver rolling stock until 2034, and ongoing maintenance for a further 30-35 years (TfL, 2018).
Chapter 5: Strategic Recommendations
Using the wealth of analysis accumulated, the final chapter focuses on turning ‘problems’ into effective and detailed solutions. It combines the opportunities in the market with Siemens’ core competencies to address the risks and impacts outlined in chapters 2 and 3.
In this chapter, I used a table to outline SRS-UK’s overall proposed strategy, and tactic breakdown. Each tactic was supported by an identified resource and/or capability that Siemens could leverage to achieve the recommended outcome. The four tactics suggested, focused on forming strategic partnerships with customers, suppliers and complementers in line with co-opetition (Zeitoun, 2019) and Kraliic’s purchasing portfolio (Kraljic, 1983) frameworks, using Siemens’ core resources.
The strategy aims to offer a seamless rail network and service delivery for passengers, along with creating jobs, which will boost economic growth and rebalance the UK economy.