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 - – increasing commodity prices, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings,
increasing inequality as vast percentage of new income is going to the top 1%, digital marketing is dominated by two big players Facebook and Google, 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 -
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.
Ability to recruit top talent
– Danfoss Internationalization is one of the leading recruiters in the industry. Managers in the Danfoss - Global Manufacturing Footprint are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
Analytics focus
– Danfoss Internationalization is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Torben Pedersen, Jacob Pyndt can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Learning organization
- Danfoss Internationalization is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Danfoss Internationalization is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Danfoss - Global Manufacturing Footprint Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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.
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.
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.
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.
Training and development
– Danfoss Internationalization has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Danfoss - Global Manufacturing Footprint Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
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.
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.
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 -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Danfoss - Global Manufacturing Footprint, is just above the industry average. Danfoss Internationalization needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
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.
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.
Need for greater diversity
– Danfoss Internationalization has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
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.
Increasing silos among functional specialists
– The organizational structure of Danfoss Internationalization is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Danfoss Internationalization needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Danfoss Internationalization to focus more on services rather than just following the product oriented approach.
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.
High bargaining power of channel partners
– Because of the regulatory requirements, Torben Pedersen, Jacob Pyndt suggests that, Danfoss Internationalization is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Low market penetration in new markets
– Outside its home market of Danfoss Internationalization, firm in the HBR case study Danfoss - Global Manufacturing Footprint needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
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 -
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.
Building a culture of innovation
– managers at Danfoss Internationalization can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
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.
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.
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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Danfoss Internationalization to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Danfoss Internationalization can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Learning at scale
– Online learning technologies has now opened space for Danfoss Internationalization to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
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.
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.
Leveraging digital technologies
– Danfoss Internationalization can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, 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.
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 -
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 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.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Danfoss Internationalization in the Strategy & Execution sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Danfoss Internationalization with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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 .
High dependence on third party suppliers
– Danfoss Internationalization high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Danfoss Internationalization can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Danfoss Internationalization
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Danfoss Internationalization.
Environmental challenges
– Danfoss Internationalization needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Danfoss Internationalization can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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.
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.
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.