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 - – there is increasing trade war between United States & China, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, geopolitical disruptions, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google,
increasing transportation and logistics costs, wage bills are increasing, 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 -
High brand equity
– Danfoss Internationalization has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Danfoss Internationalization to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
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.
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.
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.
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.
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.
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.
Innovation driven organization
– Danfoss Internationalization is one of the most innovative firm in sector. Manager in Danfoss - Global Manufacturing Footprint Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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.
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.
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 -
Aligning sales with marketing
– It come across in the case study Danfoss - Global Manufacturing Footprint that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Danfoss - Global Manufacturing Footprint can leverage the sales team experience to cultivate customer relationships as Danfoss Internationalization is planning to shift buying processes online.
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.
Slow decision making process
– As mentioned earlier in the report, Danfoss Internationalization has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Danfoss Internationalization even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
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.
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.
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 operating costs
– Compare to the competitors, firm in the HBR case study Danfoss - Global Manufacturing Footprint has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Danfoss Internationalization 's lucrative customers.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Danfoss - Global Manufacturing Footprint, it seems that the employees of Danfoss Internationalization don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
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.
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.
Slow to strategic competitive environment developments
– As Danfoss - Global Manufacturing Footprint HBR case study mentions - Danfoss Internationalization takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
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 -
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.
Creating value in data economy
– The success of analytics program of Danfoss Internationalization has opened avenues for new revenue streams for the organization in the industry. This can help Danfoss Internationalization to build a more holistic ecosystem as suggested in the Danfoss - Global Manufacturing Footprint case study. Danfoss Internationalization can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 -
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 .
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.
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.
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.
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.
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 .
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.
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.
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 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.
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.
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.
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.
