Strategy & targets
Positioning as a diversified industrial group
Our positioning as a diversified industrial group is linked to the ambition to generate strong and stable earnings, cash flow and value added. We diversify our businesses in several ways: through our presence in numerous markets worldwide, a customer base spanning a range of sectors with different cycles, and the different business models of our business areas. This diversified approach enables us to seize growth opportunities worldwide and at the same time increase the stability of our company in a volatile environment.
To boost our earnings strength, we are working on two levels: developing concrete measures to achieve profitable growth in our business areas while systematically leveraging synergies within the Group through cross-business initiatives. In the process we are increasingly focusing thyssenkrupp on profitable capital goods and service businesses in global growth regions and sectors.
The 2016 / 2017 fiscal year was a year of major strategic decisions for thyssenkrupp. In particular in February 2017 we reached agreement with Ternium on the sale of our Brazilian steel mill CSA; the sale was completed in September 2017. This also now means that a key condition has been met for contributing our European steel operations to a joint venture with Tata Steel. A memorandum of understanding was signed on September 20, 2017. We expect several clear advantages from the joint venture:
- for our steel business we are creating a sustainable future in a challenging market environment
- for thyssenkrupp, key balance sheet ratios – particularly equity ratio and gearing – will improve significantly with the launch of the joint venture
- and our capital goods businesses will gain more latitude to act flexibly and seize growth opportunities.
Business opportunities are resulting for thyssenkrupp from global market trends that require more and better solutions: Demographic change, urbanization, the rapid growth of mega cities, and globalization mean that global demand is rising (“more”). At the same time the requirements to be met by the solutions offered are increasing (“better”). The result is that we need to use resources efficiently, reduce the environmental impact of producing consumer and capital goods, and build more sustainable infrastructure. At the same time an increasingly connected world requires intelligent products and solutions.
We use our engineering expertise to develop tailored technological and business solutions to meet the current and future requirements of our customers and markets and to satisfy the demand for “more” in a “better” way. We do this in many areas with our technologies, materials, industrial processes and services, both in industrialized countries and in emerging markets. We want to create value for – and with – our customers and gain a clear competitive edge.
Successful implementation of the Strategic Way Forward
Our program for positioning thyssenkrupp as a diversified industrial group is the Strategic Way Forward, which we have been implementing rigorously since 2011.
The four action areas of our Strategic Way Forward:
- Culture change: We work in a matrix structure and have set ourselves high standards in our mission statement. Alongside a strong focus on customers and performance, our interactions are based on a clear set of values, transparency, openness and mutual respect. Reliability, honesty, consistency, integrity, and full compliance with the law and internal policies define everything we do.
- HR strategy: Our HR work is aimed at strengthening cooperation and trust, training, and talent development, as well as providing an efficient service for our businesses. We practice a culture that strengthens our employees’ personal responsibility and gives them room for personal development. Integrity and dependability are central to our work together.
- Performance orientation: For all our businesses we have defined clear targets based on peer benchmarks for earnings, cash flow and value added. The initiatives and measures to achieve them are combined in our Groupwide efficiency program “impact”. In the 2016 / 2017 fiscal year we reviewed in particular the Group’s general and administrative costs, processes and structures and compared them with those of external competitors. As a result we are convinced that our general and administrative costs at €2.4 billion are too high. We are therefore aiming to reduce them by €400 million by the end of the 2019 / 2020 fiscal year.
- Customers & markets: Our aim is to grow with our markets and advance our customers by providing competitive tailored technological solutions that create value for them. To this end we deliberately and systematically use the strength of the integrated Group. A key role in this is played by the initiative to strengthen our brand and our brand promise, summed up in our slogan “engineering.tomorrow.together.”
By systematically addressing these four strategic action areas we are steadily improving the financial situation of the Group. That in turn will provide freedom for strategic investments and research and development, and thus for future growth. In the coming years we aim to continue to expand profitably in the emerging growth regions and in the industrialized countries.
Source: Annual Report 2016/2017, p. 35-37