Case Study Description of Danfoss - Global Manufacturing Footprint
The case examines the supply chain, managerial, and organizational challenges facing a large European industrial company competing in a mature industry with strong price pressure. Established in the 1930s in Southern Jutland, Denmark, Danfoss initially produced automatic valves for refrigeration plants. The company has since grown into a major industrial group. Until the mid-1990s, Danfoss was very Europe-focused, having the majority of its sales and production there. This changed, however, with the arrival of the founder's son, Jorgen Mads Clausen, as the new CEO of the company. He initiated a process to change the company into a global player within all of its main business areas. Following this process of internationalization, the company was facing various challenges. There were three main issues which top management was concerned about: namely, Danfoss's manufacturing network; its continued global growth; and its highly engineering-based culture. The first issue came from the fact that Danfoss had followed a strategy of one product, one plant. This meant that all of its plants were set up to focus on the production of one product. This had created a situation with a lot of very specialized product lines and very few common features between them. On the other hand, the internationalization strategy had so far been quite successful for Danfoss in both Eastern Europe and China. In the United States, however, the company was still experiencing difficulties despite heavy investments in its manufacturing capacity in Mexico. In China, the company had experienced success and wanted to secure long-term growth in the market. The third issue was the very engineering-based culture of the company, which among other things was manifested in the fact that Danfoss previously developed products at the expense of consumer demand and preferences.
Swot Analysis of "Danfoss - Global Manufacturing Footprint" written by Torben Pedersen, Jacob Pyndt includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Danfoss Internationalization facing as an external strategic factors. Some of the topics covered in Danfoss - Global Manufacturing Footprint case study are - Strategic Management Strategies, Competitive strategy, Crisis management and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Danfoss - Global Manufacturing Footprint casestudy better are - – central banks are concerned over increasing inflation, supply chains are disrupted by pandemic , increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, increasing government debt because of Covid-19 spendings, increasing commodity prices,
cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Danfoss - Global Manufacturing Footprint
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Danfoss - Global Manufacturing Footprint case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Danfoss Internationalization, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Danfoss Internationalization operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Danfoss - Global Manufacturing Footprint can be done for the following purposes –
1. Strategic planning using facts provided in Danfoss - Global Manufacturing Footprint case study
2. Improving business portfolio management of Danfoss Internationalization
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Danfoss Internationalization
Strengths Danfoss - Global Manufacturing Footprint | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Danfoss Internationalization in Danfoss - Global Manufacturing Footprint Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Danfoss Internationalization in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Danfoss Internationalization has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Danfoss - Global Manufacturing Footprint - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Cross disciplinary teams
– Horizontal connected teams at the Danfoss Internationalization are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Strong track record of project management
– Danfoss Internationalization is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– Danfoss Internationalization is present in almost all the verticals within the industry. This has provided firm in Danfoss - Global Manufacturing Footprint case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Successful track record of launching new products
– Danfoss Internationalization has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Danfoss Internationalization has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Low bargaining power of suppliers
– Suppliers of Danfoss Internationalization in the sector have low bargaining power. Danfoss - Global Manufacturing Footprint has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Danfoss Internationalization to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Danfoss Internationalization digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Danfoss Internationalization has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Highly skilled collaborators
– Danfoss Internationalization has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Danfoss - Global Manufacturing Footprint HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Strategy & Execution industry
– Danfoss - Global Manufacturing Footprint firm has clearly differentiated products in the market place. This has enabled Danfoss Internationalization to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Danfoss Internationalization to invest into research and development (R&D) and innovation.
Organizational Resilience of Danfoss Internationalization
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Danfoss Internationalization does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy in the Danfoss - Global Manufacturing Footprint Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Weaknesses Danfoss - Global Manufacturing Footprint | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Danfoss - Global Manufacturing Footprint are -
No frontier risks strategy
– After analyzing the HBR case study Danfoss - Global Manufacturing Footprint, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Products dominated business model
– Even though Danfoss Internationalization has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Danfoss - Global Manufacturing Footprint should strive to include more intangible value offerings along with its core products and services.
Skills based hiring
– The stress on hiring functional specialists at Danfoss Internationalization has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Capital Spending Reduction
– Even during the low interest decade, Danfoss Internationalization has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High cash cycle compare to competitors
Danfoss Internationalization has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Lack of clear differentiation of Danfoss Internationalization products
– To increase the profitability and margins on the products, Danfoss Internationalization needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Danfoss - Global Manufacturing Footprint HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Danfoss Internationalization has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Danfoss Internationalization has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Danfoss - Global Manufacturing Footprint, in the dynamic environment Danfoss Internationalization has struggled to respond to the nimble upstart competition. Danfoss Internationalization has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the segment, Danfoss Internationalization needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Danfoss Internationalization is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Danfoss - Global Manufacturing Footprint can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities Danfoss - Global Manufacturing Footprint | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Danfoss - Global Manufacturing Footprint are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Danfoss Internationalization can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Danfoss Internationalization can use these opportunities to build new business models that can help the communities that Danfoss Internationalization operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Danfoss Internationalization can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Danfoss - Global Manufacturing Footprint, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Danfoss Internationalization can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Danfoss Internationalization to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Danfoss Internationalization to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Danfoss Internationalization is facing challenges because of the dominance of functional experts in the organization. Danfoss - Global Manufacturing Footprint case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Better consumer reach
– The expansion of the 5G network will help Danfoss Internationalization to increase its market reach. Danfoss Internationalization will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Buying journey improvements
– Danfoss Internationalization can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Danfoss - Global Manufacturing Footprint suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Danfoss Internationalization in the consumer business. Now Danfoss Internationalization can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Danfoss Internationalization can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Danfoss Internationalization can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Danfoss Internationalization in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– Danfoss Internationalization has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Danfoss - Global Manufacturing Footprint - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Danfoss Internationalization to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Danfoss - Global Manufacturing Footprint External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Danfoss - Global Manufacturing Footprint are -
Shortening product life cycle
– it is one of the major threat that Danfoss Internationalization is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Danfoss Internationalization business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Danfoss Internationalization needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Danfoss Internationalization in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Danfoss Internationalization needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Danfoss Internationalization will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Stagnating economy with rate increase
– Danfoss Internationalization can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Danfoss Internationalization can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Danfoss - Global Manufacturing Footprint .
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Danfoss Internationalization.
Technology acceleration in Forth Industrial Revolution
– Danfoss Internationalization has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Danfoss Internationalization needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Danfoss - Global Manufacturing Footprint, Danfoss Internationalization may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Consumer confidence and its impact on Danfoss Internationalization demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Weighted SWOT Analysis of Danfoss - Global Manufacturing Footprint Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Danfoss - Global Manufacturing Footprint needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Danfoss - Global Manufacturing Footprint is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Danfoss - Global Manufacturing Footprint is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Danfoss - Global Manufacturing Footprint is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Danfoss Internationalization needs to make to build a sustainable competitive advantage.