Schneider Electric Research Paper

Schneider Electric

Schneider Electric is an energy management company which operates in 105 countries on six continents: North America, South America, Africa, Europe, Asia, and Oceania. They are broken up into four segments: IT, Industry, Infrastructure, and Buildings and Partner; within these areas, their market is non-residential and residential buildings, utilities and infrastructure, industry and machine manufacturers, and data centers and networks. They specialize in electricity distribution, automation management and produces installation components for energy management. Schneider’s divisions include the following: Energy and Infrastructures, which provides for medium and low voltage, installation systems and control, renewable energies and includes customer segments in Utilities, Marine, residential and oil & gas sector; Industry, which includes automation & control which includes water treatment and mining, minerals & metals industries; Buildings, which includes building automation and security, whose customers are hotels, hospitals, office and retail buildings; Data centers and networks, and Residential which is engaged in solutions for saving electricity bills by combining lighting and heating control features (Reuters, 2018).

Schneider Electric’s revenue is broken into four segments: Asia-Pacific, North America, Western Europe, and the Rest of the World. Schneider resides in Western Europe; we will label this segment as domestic sales revenue. Schneider’s total income for 2017 was $29.7 Billion. Asia-pacific made up 28% ($8.32 Billion), North America 27% ($8.02 Billion), Rest of the World 18% ($5.35 Billion), and Western Europe 27% ($8.02 Billion). Therefore after a thorough breakdown of revenue, overseas sales constitute 73% of total revenue.

Schneider’s business strategy is to monitor global megatrends and create sustainable-conscious infrastructures. Urbanization and industrialization continue to shape lives as new economies are built, and established economies are transformed. Globally, cities are home to over 50% of the world’s population, close to ⅔ of global energy gives off more than 70% of greenhouse gas emissions. Schneider estimates that an additional 2.5 billion people will live in cities by 2050 (Schneider, 2018). Manufacturing demands will rise, and new economics will develop. The population growth in modern economies is driving the need for manufactured goods. With 1 billion people entering the global consuming class by 2025, energy needs will increase accordingly. Companies are digitizing their operations due to the rapid increase in connectivity and access to real-time information. The digitization process forces suppliers to comply with the changing focus of companies.

Schneider electric has growth through a series of acquisitions to formulate wholly-owned subsidiaries. They are seeking to change the perspective of a holding company and establish an identity as a global solution provider focused on energy management. They are focusing on rapid urbanization throughout the world, hence the establishment of subsidiaries in many different countries.

Schneider Electric, a $31 billion business with 140,000 employees operating in more than 100 countries, offers the necessary scale and range of solutions to take on the energy challenge. The critical bases of competition are as follows: product quality and performance, the range of products and services offered customer service, foreign competition, and price. The ability to provide high-performing and reliable electrical equipment is vital given the nature of some customers and end users who, in turn, seek to offer highly reliable products and services. Also, customers often wish to minimize replacement, repair and maintenance expenditures (Miller, 2018). Due to Schneider’s massive capital expenditure resources, they can acquire companies that have technologies to improve their current services and purchase advancement to protect their existing products.

Schneider operates with a moderate and steady regulatory environment. Environmental laws and regulations are the main issues that affect Schneider’s ability to perform. For example, The Environmental Protection Agency significantly increased rules for manufacturers in 2012, which caused industry production costs, including those associated with materials purchasing and waste disposal, to rise slightly and pressure industry profit margins down. The EPA puts forth standards detailing what type of materials may be used in manufacturing and the acceptable levels of emissions from manufacturing facilities (EPA, 2018)

Schneider also benefits from tariffs on competing imports, favorable tax incentives and loan guarantees and a renewed government spending focus on the upgrading of aging infrastructures. The Federal Energy Regulatory Commission issued a rule on motivation and performance-based rates for transmission investment; reducing the tax life of transmission assets; providing mandatory and enforceable transmission reliability standards; containing energy efficiency standards for new products; promoting standards for devices utilizing standby power; while also promoting energy efficiency in new and existing buildings (Miller, 2018). The costs associated with operations differ depending on levels of offshoring and outsourcing, company resources, and technological efficiencies. The industry they are in is less profitable compared to manufacturing industries due to high wages associated with higher levels of skill. Furthermore, the equipment is much more massive than other products, and therefore logistical costs are more significant and cut into profit margins.