Sieman Case
For the exclusive use of M. Muse, 2014.
Harvard Business School
9-191-006
Rev. October 2, 1997
Siemens Electric Motor Works (A) (Abridged)
Ten years ago our electric motor business was in real trouble. Low labor rates allowed the Eastern Bloc countries to sell standard motors at prices we were unable to match.
We had become the high cost producer in the industry. Consequently, we decided to change our strategy and become a specialty motor producer. Once we adopted our new strategy, we discovered that while our existing cost system was adequate for costing standard motors, it gave us inaccurate information when we used it to cost specialty motors.
—Mr. Karl-Heinz Lotte, director of Business Operations, EMW
Siemens Corporation
Headquartered in Munich, Siemens AG, a producer of electrical and electronic products, was one of the world's largest corporations. Revenues totaled 51 billion deutschmarks in 1987, with roughly half this amount representing sales outside the Federal Republic of Germany. The Siemens organization was split into seven major groups and five corporate divisions. The largest group, Energy and
Automation accounted for 24% of total revenues. Low wattage alternating current (A/C) motors were produced at the Electric Motor Works (EMW), which was part of the Manufacturing Industries Division of the Energy and Automation Group. High wattage motors were produced at another facility.
The Electric Motor Works
Located in the small town of Bad Neustadt, the original Siemens EMW plant was built in 1937 to manufacture refrigerator motors for "Volkskuhlschraenke" (people's refrigerators). Less than a year later, Mr. Siemens halted the production of refrigerator motors and began to produce electric motors for other applications. At the end of World War II, the Bad Neustadt plant was the only Siemens factory in
West Germany capable of producing electric motors. All the other Siemens production facilities had been completely destroyed or seized by Eastern Bloc
Harvard Business School
9-191-006
Rev. October 2, 1997
Siemens Electric Motor Works (A) (Abridged)
Ten years ago our electric motor business was in real trouble. Low labor rates allowed the Eastern Bloc countries to sell standard motors at prices we were unable to match.
We had become the high cost producer in the industry. Consequently, we decided to change our strategy and become a specialty motor producer. Once we adopted our new strategy, we discovered that while our existing cost system was adequate for costing standard motors, it gave us inaccurate information when we used it to cost specialty motors.
—Mr. Karl-Heinz Lotte, director of Business Operations, EMW
Siemens Corporation
Headquartered in Munich, Siemens AG, a producer of electrical and electronic products, was one of the world's largest corporations. Revenues totaled 51 billion deutschmarks in 1987, with roughly half this amount representing sales outside the Federal Republic of Germany. The Siemens organization was split into seven major groups and five corporate divisions. The largest group, Energy and
Automation accounted for 24% of total revenues. Low wattage alternating current (A/C) motors were produced at the Electric Motor Works (EMW), which was part of the Manufacturing Industries Division of the Energy and Automation Group. High wattage motors were produced at another facility.
The Electric Motor Works
Located in the small town of Bad Neustadt, the original Siemens EMW plant was built in 1937 to manufacture refrigerator motors for "Volkskuhlschraenke" (people's refrigerators). Less than a year later, Mr. Siemens halted the production of refrigerator motors and began to produce electric motors for other applications. At the end of World War II, the Bad Neustadt plant was the only Siemens factory in
West Germany capable of producing electric motors. All the other Siemens production facilities had been completely destroyed or seized by Eastern Bloc