International Management Fall 1314 BOSCH GROUP IN INDIA

International Management Fall 13/14 BOSCH GROUP IN INDIA TRANSITION TO A TRANSNATIONAL ORGANIZATION Enterprise Group Mariana Silva 10737 Filipa Malheiro 11500 Fermín Ezcurra 1489 Mei Wei Chee 1613 Javier Resúa 1436 Daniel Chow 1558

Business Development CEO Javier Resúa Filipa Malheiro Organization Development manager Business Analysts Fermín Ezcurra Mei Wei Chee Business Development Daniel Chow Business Analysts Mariana Silva Bosch Group in India

AGENDA • Bosch group The beginning Internationalization Bosch group nowadays • Organizational Structure • New matrix structure in Bosch: Vertizalization • Bosch group in India Bosch organization in India Verticalization process • Challenges Fragmentation of the organization Confusion and conflict Voice of the Region May Be Lost Resentement Across Different Bosch Companies in India • Conclusion Bosch Group in India

Who established the firm? The founder, Robert Bosch (1861 -1942) Robert Bosch in 1886 • He was a pioneer and inventor • He spent 10 years working around the world which shaped the future directions for Bosh

November 15, 1886 First workshop • Robert founded “Robert Bosch Cmb. H” in Stuttgart in 1886 • It was a small workshop with a staff of just two • He started the company as the “Workshop for Precision Mechanics and Electrical Engineering” Pen drawing of the first workshop, 1886

Internationalization International sucess: • First office outside Germany in 1898, in London • United States in 1906; South Africa, South America and Australia in 1922 Global Company: • 75% of its revenues generated outside Germany • More than 350 subsidiaries across 60 countries • Products are sold in around 150 countries First Office abroad, London

Nowadays • Leading multinational technology and services company • Diversification. Core products are: Ø Automotive components: brakes, electrical drives, motors, etc. Ø Industrial products: drives, packaging technology, etc. Ø Consumer goods and building products: household appliances, etc. • • • Revenue: In 2012 generated sales of 52. 5 billion euros Employees: 306, 000 around the world Equity: A non-profit foundation holds the 92% of the capital stock

Research & Development Success in innovation and creativity • More than 4 billion euros for research and development in 2011 • Over 4, 800 patents applications worldwide in 2012 • International research and technology structure • 1, 300 employees pave the way for the technologies of tomorrow

Bosch Group in India

BOSCH ORGANIZATIONAL STRUCTURE Phase 1 • No need formal structure • Interact with employees on personal basis 1886 to 1900 Phase 2 1900 to 1925 Phase 3 • Transit from craft to industrial production • Functional structure • Activities differentiated horizontally and vertically to obtain economies of scale • Begin international activity • Functional structure around assembly line system launched in 1925 due to the after effects of WWI • Begin diversification 1925 to 1960 Bosch Group in India

BOSCH ORGANIZATIONAL STRUCTURE • Restructuring of the company due to WWII • Three waves of diversification – Power Tools (1960), Packaging Technology (1964) and Telenorma (1982) Phase 4 1960 to 1990 • Adoption of product divisions Phase 5 1990 to 2007 • Required matrix structure • Primacy given to geographic structure • Verticalization achieved by transforming global matrix structure into transnational structure • Global divisions, Corporate departments, Regional organization and Phase 6 Global sales and marketing organization 2007 to now Bosch Group in India

NEW MATRIX STRUCTURE IN BOSCH Bosch Group in India

VERTICALIZATION Global Matrix Structure Transnational Structure • With a transnational structure, Bosch generally organize its business along geographic, product and functional levels. • Integration is achieved within various product categories or within geographic areas or functions. • A transnational structure helps coordinate all related business activities simultaneously. Bosch Group in India

Bosch in India 1. Bosch Organization in India 2. Verticalization Process in India

1. BOSCH ORGANIZATION IN INDIA ▪ 1951 - Bosch started operating ▪ 1953 – Development of manufacturing operations segments: - automotive technology - industry technology - consumer goods and building technology - engineering an IT services ▪ Over the years the company tried to focus on innovation IN 2011 Bosch Group in India -> 11 manufactoring sites and 4 development centers In India, the Bosch group had about 25. 000 employees Revenues around 113. 000 million

Bosch Ltd India’s largest auto-component manufacturer Bosch Chassis systems India Ltd Business divisions Business areas: actuation, foundation and modulation of the braking systems and produce hydralic brake for a wide range of vehicles Bosch Rextroh India Ltd Focus its production on industrial hydraulics, electric drives, controls, linear motion Robert Bosch Engineering Business Solutions Ltd Lending global supplier of technology and services Bosch Group in India

Bosch Automotive Electronics India Private Ltd Joint Venture MH Filter India Private Ltd Bosch Electrical Drives India Private Ltd Bosch Group in India

Implications of Verticalization For Bosch Group in India Genesis in poor North America performance (sales and profitability were not too good) Recent changes: • Link Indian operations to other countries • Increase the set of product divisions • Allows best practices, ensues consistency in manufacturing processes and facilitates balancing of production • Produce more units at competitive prices Bosch Group in India

Consequences of these recent changes: • Mobility of resources between subsidiaries • Uniformity of products and manufacturing methods • Development of a global product strategy PROBLEM: Regions may become weak Solution: Country Head. The country head is the head of all entities in India. Local needs of the Indian market and Indian operations are preserved. Bosch Group in India

Advantages • • • Facilitates coordination of the value chain Decisions consistent with strategic objectives Duplicating activities across subsidiaries Reduces the risk that lower-level of employees make mistakes Consistent dealing with stakeholders Disadvantages • • Discourage initiative among lower-level employees Demoralized employees simply wait to be told what to do Loss of innovation from bottom-up information flow Slow information flow Bosch Group in India

2. VERTICALIZATION PROCESS IN INDIA - Started in 2007 and offered several opportunities to Indian units perfome better What are these opportunities? Bosch Group in India

Verticalization Process: Opportunities Greater visibility for smaller divisions New Career opportunities New opprtunities to contribute globaly Development of a Global perpective Bosch Group in India BEFORE Some of the smallest divisions were neglected Limited carres’ opportunities The interaction betwee sectors was limited The opportunity to understand the Dynamics of global industry was unknown AFTER These smaller divisions have now the attention of the top managers Employees can pursue careers in the global divisions Indian operations have now the opportunity to participate Indian bases are now able to develop a global perspective

CHALLENGES 1. 2. 3. 4. Fragmentation of the organization Confusion and conflict Voice of the Region May Be Lost Resentement Across Different Bosch Companies in India

1. FRAGMENTATION OF THE ORGANIZATION Requires the approval of the Global Product Group Multiple reporting within India and outside which causes delays in resolving simple issues Difficult for employee mobility Many units instead of one Profitability became public to every employee Conflicts between units Conflicts between divisions that are supposed to work in synergies because of different goals and incentives More profitable divisions are reluctant to “subsidize” the less profitable ones Bosch Group in India

2. CONFUSION AND CONFLICT The Head of the Division has to report to the MD of Bosch in India and to a person in the Asia region The importance of command is no longer there Multiple reporting lines Difficult to adapt to this new method Indian culture Personality crashes “We do not have the ability to adjust. Some of us talk too much” Strong and assertive personalities dominate over the weak and submissive ones Bosch Group in India

3. VOICE OF REGION MAY BE LOST • Target responsibility has final authority in case of conflict. • Other markets might be more attractive than India. Bosch Group in India

3. VOICE OF REGION MAY BE LOST • Products unique to India may be neglected by Global Product Group. • Administrative decisions used to have more freedom before verticalization. Bosch Group in India

4. RESENTMENT ACROSS DIFFERENT BOSCH COMPANIES IN INDIA • Due to verticalization. • Human resources decisions were put into place separately. Bosch Group in India

CONCLUSION • Steady transition from a functional structure to a transnational organisation through the verticalization process. • Verticalization presents beneficial opportunities for India, but challenges must be met to facilitate the needs of the Indian market. Bosch Group in India