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issue: April 2004 Appliance Magazine Special Section: BSH Bosch und Siemens Hausgerte GmbH

Bosch und Siemens Corporate Overview
Expanding its Reach

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by Lisa Bonnema, Editor

With a strategic blend of confidence and awareness, BSH Bosch und Siemens Hausgeräte GmbH is taking on the global appliance industry with one main goal - to establish a premium position in every market it enters.

If there is one thing that can be said about BSH Bosch und Siemens Hausgeräte, it's that the company knows its position. Currently the world's number three maker of domestic appliances, BSH has strong aspirations for further growth, but won't do so at the expense of its carefully constructed image.


APPLIANCE magazine traveled to Munich, Germany to visit the corporate headquarters of BSH Bosch und Siemens Hausgeräte.


"Our ambition is to bring premium and quality products to the market, normally at prices which are clearly above the average price of the category in each country," states Dr. Kurt-Ludwig Gutberlet, president and CEO. "That is and has always been our position - in Germany originally, then in Europe, and now all the markets worldwide."

Even in today's highly competitive appliance market, BSH stands strong on its premium policy, maintaining that success not only requires confidence, but patience. "We don't push for the highest possible market share in the short term," Dr. Gutberlet notes. "I think each company can only pursue one policy successfully and should not mix the policies to run for market share at any cost."

BSH's new headquarters, located in Munich, Germany, is a clear symbol of the appliance maker's commitment to design and the environment. Putting its money where its mouth is, BSH created the 39,600-sq-m headquarters around Feng Shui design principles.
The building is glass-covered and made from ecologically sound materials. In addition to utilizing an intelligent management system based on renewable resources, the natural light coming from the 3,840 windows "combats premature fatigue," according to BSH. About 1,500 staff members walk through a lobby full of green gardens, water fountains, rocks, and sculptures. Glass corridors link three large office units together. BSH says the entire building was designed around "transparency, mobility, and functionality of workflow."
The strategy seems to being working. With annual sales of more than 6.3 billion euros (approx. U.S. $8.0 billion) and 43 factories in 15 different countries, this is one company that can stand tall behind its convictions. But that's not to say the German appliance maker doesn't have a few tricks up its sleeve. By strategically utilizing every asset it possesses - from its deep roots and well-known forefathers to its high profit margins - BSH has definite goals of not only overcoming the challenges of today's saturated appliance markets, but extending far beyond its current position worldwide.

The Ultimate Combination

BSH Bosch und Siemens Hausgeräte GmbH was founded in 1967 as Bosch-Siemens Hausgeräte GmbH, a 50:50 joint venture between German powerhouses Robert Bosch GmbH and Siemens AG. With both companies serving as leading players in electronics technology and electrical engineering, the marriage of these two companies looked good from the start.

"When Bosch and Siemens joined forces in the white goods industry more than 35 years ago, the good thing was that both companies executed almost identical values," Dr. Gutberlet notes. "It was not a difficult joint venture like low-cost and premium companies trying to match up. Looking from the outside, they are very similar. They are both quality-orientated, technically advanced, and financially solid; they don't run unnecessary risks. The whole set of values and attitudes are quite similar. This is the reason why our strategy, by definition, is a premium position in the marketplace."

Starting out with just three manufacturing sites in Germany (Berlin, Giengen, and Traunreut) and sales of 0.51 billion euros, BSH quickly grew in the coming years as it strengthened its German presence and began acquiring assets outside of its home country. Some highlights include its 1976 investment in Pistos A.E. of Athens, Greece, now known as BSH Ikiakes Syskeves A.B.E., and the take over of the Neff brand in 1982. From 1988 to 1989, it established itself in the Spanish market, with an investment in Balay, S.A. (Zaragoza, Spain) and the acquisition of Safel, S.A. (Pamplona, Spain).

By 1990, BSH had grown to 13 manufacturing sites and was producing sales of 3.32 billion euros. But the real growth was yet to come. During the ensuing 10 years, the company took on a series of acquisitions that played a key role in developing the company's global position.

In 1993, it moved into Eastern Europe with the takeover of a small household appliance factory in Slovenia. Just 1 year later, it moved in the Chinese and Latin American markets with the founding of BSW Household Appliances Co. Ltd., a joint venture with Wuxi Little Swan Group, and the acquisition of voting capital in Brazilian appliance maker Continental 2001 S/A (São Paulo, Brazil), known today as BSH Continental Eletrodomésticos.

The company began its move into the U.S. market in 1997 with the construction of BSH Home Appliances, Ltd. Partnership in New Bern, NC, U.S., now known as BSH Home Appliances Corporation located in Huntington Beach, CA, U.S. In 1998, it made one of its most strategic acquisitions with the takeover of high-end cooking appliance brand Thermador. Around the same time, the manufacturer decided to add component development and production to its competencies, taking over two Siemens divisions - a controls and sensors facility in Regensburg, Germany and a motors and pump plant in Michalovce, Slovakia.

And the momentum hasn't stopped over the last few years. In 2001, BSH joined forces with Hitachi to establish BHST Washing Appliances Ltd. in Kabinburi, Thailand, and in 2002, it opened a new dishwasher plant in Lodz, Poland. Just last year, the company made major headlines in the U.S. appliance industry after it started producing washing machines, dryers, and freestanding ranges at its plant in New Bern, NC, U.S., adding these products to its already existing dishwasher portfolio.

Today, BSH makes appliances in every major category - laundry, dishwashing, cooking, and refrigeration/freezing - as well as floor care and small appliances such as irons, food processors, deep fryers, and coffee/espresso makers.

BSH's brand portfolio currently consists of 13 brands, although Bosch and Siemens remain its core brands, representing approximately 85 percent of the company's turnover. "Typically our ambition is to grow our main brands - Bosch and Siemens - into the key brands in each market," Dr. Gutberlet explains. "Fortunately, it works out that way - even in countries where we started very small. For instance, we made a big acquisition in Spain 14 years ago. At the beginning, Bosch and Siemens represented maybe 5 percent of the business, but now it has grown. The international brands in the long run are more attractive to most consumers."

Adding to the company's premium image are its high-end, specialty brands Gaggenau, Neff, and Thermador. Regional brands include Balay, Ufesa, and Lynx for the Spanish market; Pitsos for the Greek market; Profilo for the Turkish market; and Continental for the South American market, including Brazil, Argentina, and Mexico.


To maintain its reputation for innovative cooking appliances, BSH created the revolving Slide® handle and fold-away Hide® oven door, which are available on its premium Neff ovens.

According to Dr. Gutberlet, BSH has invested a lot of time and money over the last 10 years combining its many acquisitions into one, cooperative company. "BSH grew a lot in the 1990s and to integrate those acquisitions into a smoothly operating, worldwide network is certainly the biggest challenge that we had to go through," he admits. "We have made a lot of progress there. This is something that all companies that acquire and build up new businesses in new regions have to do; otherwise you don't have synergy, only separate businesses."

Establishing a Premium Position

In addition to creating logistical synergy, BSH's premium position strategy also requires that all of its factories - no matter where they are located - provide the same quality products. "We try to achieve the same productivity and quality in all these factories," Dr. Gutberlet says. "It's all on the same level. We had that discussion years back if we should have two levels of quality - one for Bosch and Siemens and one for the local brands, but that is finished. If you want a good brand, you need to deal with it carefully. We don't deliver quality standards according to the country."

To ensure that its high German standards are present in its plants worldwide, BSH evaluates each new factory and the products they produce, and then upgrades and integrates where necessary. Dr. Gutberlet explains: "For example, we acquired a Chinese refrigeration company with rather limited technology and a rather outdated product platform. We then switched it completely over to the European product platform. We invested in the factory to offer a really updated product."

On the other hand, BSH also strives to recognize the strengths and identities of the brands it acquires. When BSH acquired U.S.-based Thermador, for example, it was a truly independent, mid-sized company with all local development and manufacturing facilities, according to Dr. Gutberlet. "We will continue, of course, to serve the Thermador brand in the U.S. with products from the U.S. market. However, we have integrated it into our R&D network so it will be matched with our European development platform," he explains.

To facilitate total integration, BSH often transfers employees to and from the new factories and also the corporate headquarters. "It is not sufficient to just send the blueprints over and hope that it will work on its own," Dr. Gutberlet says. "It's not only a new product design; it is also the quality system, the management system. A lot of new business elements have to be brought in."

He adds that BSH recognizes that developing high-quality, premium products on a worldwide scale doesn't necessarily mean providing the same appliances for every region. "The first ambition is to have the same level of quality, and then make the product as suitable to the regional market as possible," Dr. Gutberlet says. "Home appliances have to respond much more to living habits, to eating habits, and to the space available in the home. In an American kitchen, it is, on average, much larger than a European or Hong Kong kitchen. We cannot possibly be successful with the same products."

One example, Dr. Gutberlet notes, was redesigning its proven German washing machines to accommodate the preferences of the Asian consumer. "As in the U.S., Asian people are used to washing in cold water. European washers are designed to operate up to 90°C, with an average use at 40°C to 60°C. So we successfully adapted our product to meet the local requirements by adding specialized washing programs. And in Hong Kong, washing machines are not kept inside the apartments because they are too small. Instead, they are on the balcony, so they have to withstand rain," he explains.

And while its premium strategy has worked well in the Western European market, where it currently holds the number-one position, Dr. Gutberlet admits that the policy may initially limit its success in international markets such as China and Eastern Europe, where the average consumer can't afford high-end appliances. The appliance maker, however, isn't intimidated. "With Bosch and Siemens being premium brands, we do not have the ambition to serve all the segments of these markets," he says. "You have a lot of cheap products being sold today, for instance, in Eastern Europe. We are confident that year by year with the progress in this region continuing, that the share of premium products in sales will go up there. We've developed our position and don't want to spoil the brand image of Bosch and Siemens. We are confident we will have a similar position in the future in Eastern Europe as we have in Western Europe."


Staying true to its premium strategy, BSH called on F.A. Porsche to design its Porsche line of high-end small appliances. Sold under the Siemens brand, the designer series includes a coffee maker, stand mixer, toaster, cordless kettle, hair dryer, and citrus press. Aesthetics are a key feature of the series - all of the appliances are made of brushed metal and most feature stainless steel components.


The same, he believes, holds true for China. "The vast majority of the Chinese market is poor," Dr. Gutberlet says. "We cannot offer all of them the chance to buy a Siemens refrigerator. It is not possible. So we bet on those who are more affluent, and, fortunately, this group is growing tremendously."

BSH is also willing to wait for market acceptance of new technologies and features, such as energy efficiency. "Sometimes we have to focus on issues that are not yet that relevant in an emerging market," he says. "That is also part of our policy, even if we don't get paid for that in the first year. It normally pays off after a couple of years."


Quality Breeds Innovation

According to Dr. Gutberlet, there are also immediate benefits to being a premium brand. "If you can justify and defend a premium in the marketplace, of course you have the benefits," he explains. "You get better margins than other companies. And, of course, we need these margins to invest into new technology. You have more space to innovate."

This, Dr. Gutberlet says, ultimately benefits the consumer. "I think that is also what consumers basically want. They don't want a standard product or a commodity-type of product. Consumers like to differentiate themselves with certain products they own or buy," he notes.

In fact, Dr. Gutberlet feels innovation is the only way companies will survive in today's appliance industry. "The key point about the home appliance business is that it is a very mature market. So unit-wise, there is not a lot of room for growth in the key areas of the world - not in Western Europe, not in North America, and even in China, where everybody thinks it is such a booming market, home appliances, being products that everybody needs, already have quite a high saturation," he explains.

While Dr. Gutberlet says there is nothing wrong with the appliance industry being mostly a replacement business, there is the problem of strong competition and, subsequently, price erosion. "We say it is our ambition to make our products ever-more attractive so to keep the price level," he explains. "This can be considered an aggressive approach - keep the prices stable and put more into the product. Otherwise, the industry turnover of the category would go down by definition, and the price goes down year by year. We feel that's the responsibility of the leading companies, but definitely if you position yourself as a premium brand and premium company, this must be our key target."

And the company is taking that responsibility seriously, with several innovations in its pipeline. "We have lots of ideas and solutions that should allow us to keep or even increase our average price," confirms Dr. Gutberlet. In fact, BSH claims to file more than 300 patents annually and has a 10-million-euro budget just for innovation outside of its core appliance categories.

One of BSH's key innovation focuses in the coming years will be introducing induction cooking to markets outside of Europe. "We are very good at that, and we have a clear leading position in the European market. It is a technically complicated system, and it is not a cheap solution, but it offers tremendous benefits," says Dr. Gutberlet. Known for advantages such as speed and an easy-to-clean surface, BSH feels it is only a matter of time before it gains popularity in other regions, especially the U.S.

"Knowing that most of American households are used to gas cooking and, of course, insist on having something as flexible and fast as gas, this is the alternative, and it has potential," he says.

The company has also introduced what it claims is the first fully electronically controlled gas cooktop and a new cleaning technology it calls "ecolysis" or "ecoclean," which uses an innovative nanotechnology surface treatment that allows the oven to "clean itself" while baking and cooking.

Additionally, in October 2003, the company completed the initial launch of its serve@Home networking line of appliances. Originally introduced to a select number of German retailers, BSH is carefully introducing the product to ensure that customers receive adequate service and information about the new appliance category before it makes a mass launch. "Even though it is using powerline technology, you still have some technical requirements which some technicians have to check beforehand," Dr. Gutberlet explains. "You will need a specialist there, which we don't have abundantly all over the world. So we'll take it step by step. We feel it is something where people can expect a good system performance from the beginning, so we want to be on the safe side there."

BSH is also experimenting outside of the traditional "white box" appliance categories. Its new "dressman" ironing appliance, for example, is the first of its kind. Released to the German market in November 2003 under the Siemens brand, the appliance is a new spin on the iron. Formed in the shape of a person's upper body, users "dress" the appliance with a damp shirt that is then dried and released of wrinkles as warm air blows from the appliance to the shirt. The whole process takes about 6 min.

According to Petra Drotbohm, head of Corporation Technology Coordination and Engineering, the appliance was not only a result of innovative thinking, but also market research. "It started in our central technology innovation development, which has the capabilities to develop products we don't have so far," she explains. "We made an analysis of what the typical housewife hates most, and ironing was listed as one of the top three."

Market Challenges

While dedicated to offering premium products, Dr. Gutberlet is quick to point out that with today's difficult economic environment, cost is just as much of an issue for BSH as it is for other companies. "We cannot say that we make innovative and high-quality products and that cost doesn't matter. We have to do very intense work on that as well," he notes.

As with most corporations, the company has spent much of last few years focusing on value creation. "It's not just about the EBIT margins, but also the ratio between the EBIT margin and capital utilization," Dr. Gutberlet explains. "That is a key performance indicator for BSH. That is why every department has to deliver according to a budget and predictions."

Another market challenge the company is addressing is what Dr. Gutberlet calls the "critical consumer." While he believes that "consumers will pay a premium for quality products," he says that economic conditions have affected consumer purchasing attitudes. "The current situation is a challenge because consumers are much more careful nowadays and won't easily spend more for a product simply because it has a nice brand name or because it has some extra features which consumers may need or not," he explains.

BSH's response, he says, is to keep its prices at a reasonable level. "There is a willingness to pay a premium, but it is not a 100-percent premium necessarily; it's maybe a 10-, 15-, 20-percent premium only. That is our way to cope with this more critical consumer nowadays," Dr. Gutberlet says.

A major downturn in the German appliance market and increased competition from low-cost manufacturing sites has also kept the company on its toes. While the company has been successful in increasing its presence outside of Germany - 73 percent of its sales now come from outside Germany - Western Europe as a whole still makes up 85 percent of its sales.

"I would say there is no doubt we are operating to a large extent in non-growing markets, which is particularly true for Western Europe, so we had to increase our competitiveness without being able to benefit from a growing market. This has also led to increasing price pressure in our industry," Dr. Gutberlet says. "With more and more products coming in from low-cost manufacturing sites, this has been and continues to be a great challenge for our company. All of these competitors will try to catch some market share in a market that is not growing."

Taking on the World

Even with its share of challenges, BSH has emerged successful. In 2002, the company was able to increase group sales by more than 3 percent compared to the prior year, while also boosting sales outside Germany by more than 6 percent. In 2003, despite a very difficult market, the company maintained its turnover. Cleared by foreign exchange rate impacts, BSH posted a 5-percent increase in turnover from the previous year's level.


Already a leader in European appliance market, BSH's next mission is North America. The appliance maker believes the U.S. is a key component to its worldwide growth and plans to more than double its business in the U.S. in the next 3 to 4 years. Recent growth initiatives include a $180-million factory expansion in New Bern, NC, U.S. that brought Bosch- and Siemens-branded freestanding cooking and laundry appliances to the U.S. market.


And the manufacturer has big plans to continue on that path, focusing specifically on markets outside of Western Europe. "In markets outside Europe, we have a much smaller position," Dr. Gutberlet admits. "In China, for instance, with Siemens, we have a premium position in laundry and refrigeration, but we are a rather small player compared to the local giants like Haier. In Latin America, we are number three. In the U.S. market, we are still you could say a niche player - a small manufacturer, a small company compared to the big four, but with good ambitions and projects to support growth."

In China, the company's ambitious growth plan includes offering new product categories and expanding current capabilities. For example, it just started producing water heaters for the Chinese market in mid-2003 and has plans to enter the cooking market as well.

"We also think China will be a good place for us to manufacture small appliances," Dr. Gutberlet adds. "The small appliance business represents roughly 10 percent of our business, with very strong growth in the past years."

This, he says, is not to say that BSH will relocate a large percentage of its manufacturing to the area - a common practice among many players in this market segment. "We also have competitive production sites in Europe. For instance, we have a good factory in Slovenia, which really creates adequate quality and cost positions, and we have factories in Spain. But, no doubt, we think China can be an important cornerstone in our strategy for small appliances."

BSH is just as confident in its future in Eastern Europe, which accounts for only 6 percent of the group sales, excluding Turkey. "Fortunately, it is not difficult for German companies to grow a business in Eastern Europe. We are not only regionally close, but our brands are already absolutely well known. If you go to Russia everybody knows Bosch. We have a good starting position there."

The company also has plans to set up new manufacturing sites in the region. "We will definitely expand our industrial activities and sales activities in this area," Dr. Gutberlet notes. "We have quite a successful operation in Poland. We have component and development activities in Slovakia. For us, it is not a project, but already reality."

As far as increasing its Eastern European market share in the short-term, Dr. Gutberlet says the company is setting realistic goals. "Most of the people in Eastern Europe are rather poor. The average income is so much below the level of Western Europe that, by definition, the share of affluent people is limited."

Looking to the North American market, BSH believes that the U.S. is a key component to its worldwide growth. In 2002, the company began a U.S. $180-million factory expansion in New Bern, NC, U.S. that brought Bosch- and Siemens-branded freestanding cooking and laundry appliances to the U.S. market. According to Dr. Gutberlet, "We will no doubt more than double our business in the U.S. in the next 3 to 4 years."

Even with such unmistakable confidence, Dr. Gutberlet believes that a true competitive spirit requires awareness. "Always look at what others do. There are many competitors out there that have good ideas," he notes. "Never rely on what you achieve. You can be proud, but never allow it to relax you."

And based on the goals this company has set, there won't be much time for relaxing. With its sights set high and its foundation grounded in the values of its founding companies, BSH Bosch und Siemens Hausgeräte GmbH is ready to take on the world.

"We are a company with a clear competitive approach," Dr. Gutberlet says. "We don't want to stay in a niche; we are too large. We are number three in the world, so we have to fight in the mass market - but with our specific approach to the market."


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