Danfoss RC in China (B): Big Challenges SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Case Study SWOT Analysis Solution
Case Study Description of Danfoss RC in China (B): Big Challenges
Danfoss is one of Denmark's largest family firms, producing components for a wide range of industrial control activity. Spanning the period 1996-2004, the case begins by looking at Danfoss' globalisation strategy, then focuses on its specific experience and learning in China, before returning to the wider challenges that globalisation in China poses for Danfoss as a whole. The focus is on the Refrigeration & Controls (RC) division, the key Danfoss division to enter China.
Swot Analysis of "Danfoss RC in China (B): Big Challenges" written by Natasha Lee-Evans, Jonathan Story includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Danfoss Rc facing as an external strategic factors. Some of the topics covered in Danfoss RC in China (B): Big Challenges case study are - Strategic Management Strategies, Economics, Financial management, Globalization, Government, Manufacturing, Strategy and Global Business.
Some of the macro environment factors that can be used to understand the Danfoss RC in China (B): Big Challenges casestudy better are - – challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, wage bills are increasing,
banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Danfoss RC in China (B): Big Challenges
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Danfoss RC in China (B): Big Challenges case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Danfoss Rc, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Danfoss Rc 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 RC in China (B): Big Challenges can be done for the following purposes –
1. Strategic planning using facts provided in Danfoss RC in China (B): Big Challenges case study
2. Improving business portfolio management of Danfoss Rc
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Danfoss Rc
Strengths Danfoss RC in China (B): Big Challenges | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Danfoss Rc in Danfoss RC in China (B): Big Challenges Harvard Business Review case study are -
High switching costs
– The high switching costs that Danfoss Rc has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Sustainable margins compare to other players in Global Business industry
– Danfoss RC in China (B): Big Challenges firm has clearly differentiated products in the market place. This has enabled Danfoss Rc to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Danfoss Rc to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Danfoss Rc is present in almost all the verticals within the industry. This has provided firm in Danfoss RC in China (B): Big Challenges 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.
Ability to lead change in Global Business field
– Danfoss Rc is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Danfoss Rc in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Danfoss Rc has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Danfoss RC in China (B): Big Challenges 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.
Ability to recruit top talent
– Danfoss Rc is one of the leading recruiters in the industry. Managers in the Danfoss RC in China (B): Big Challenges are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Operational resilience
– The operational resilience strategy in the Danfoss RC in China (B): Big Challenges 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.
Strong track record of project management
– Danfoss Rc is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Danfoss Rc is one of the most innovative firm in sector. Manager in Danfoss RC in China (B): Big Challenges Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Superior customer experience
– The customer experience strategy of Danfoss Rc in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Danfoss Rc has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Danfoss Rc to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Danfoss Rc 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 RC in China (B): Big Challenges HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Danfoss RC in China (B): Big Challenges | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Danfoss RC in China (B): Big Challenges are -
Increasing silos among functional specialists
– The organizational structure of Danfoss Rc is dominated by functional specialists. It is not different from other players in the Global Business segment. Danfoss Rc needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Danfoss Rc to focus more on services rather than just following the product oriented approach.
Workers concerns about automation
– As automation is fast increasing in the segment, Danfoss Rc 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Danfoss RC in China (B): Big Challenges, is just above the industry average. Danfoss Rc 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.
No frontier risks strategy
– After analyzing the HBR case study Danfoss RC in China (B): Big Challenges, it seems that company is thinking about the frontier risks that can impact Global Business 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.
Interest costs
– Compare to the competition, Danfoss Rc 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.
Lack of clear differentiation of Danfoss Rc products
– To increase the profitability and margins on the products, Danfoss Rc needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Danfoss Rc is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Danfoss RC in China (B): Big Challenges can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Danfoss RC in China (B): Big Challenges 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 Rc has relatively successful track record of launching new products.
High bargaining power of channel partners
– Because of the regulatory requirements, Natasha Lee-Evans, Jonathan Story suggests that, Danfoss Rc 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.
Aligning sales with marketing
– It come across in the case study Danfoss RC in China (B): Big Challenges 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 RC in China (B): Big Challenges can leverage the sales team experience to cultivate customer relationships as Danfoss Rc is planning to shift buying processes online.
Need for greater diversity
– Danfoss Rc 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.
Opportunities Danfoss RC in China (B): Big Challenges | 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 RC in China (B): Big Challenges are -
Developing new processes and practices
– Danfoss Rc can develop new processes and procedures in Global Business 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 Rc 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 Rc to hire the very best people irrespective of their geographical location.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Danfoss Rc can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Danfoss Rc can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Manufacturing automation
– Danfoss Rc can use the latest technology developments to improve its manufacturing and designing process in Global Business segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Loyalty marketing
– Danfoss Rc has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Building a culture of innovation
– managers at Danfoss Rc 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 Global Business segment.
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 Rc 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.
Leveraging digital technologies
– Danfoss Rc 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Danfoss Rc in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– Danfoss Rc 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 RC in China (B): Big Challenges - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Danfoss Rc to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Danfoss Rc can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Danfoss RC in China (B): Big Challenges 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Danfoss Rc is facing challenges because of the dominance of functional experts in the organization. Danfoss RC in China (B): Big Challenges 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Danfoss Rc 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.
Threats Danfoss RC in China (B): Big Challenges External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Danfoss RC in China (B): Big Challenges are -
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Danfoss Rc can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Danfoss Rc 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 Rc 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 RC in China (B): Big Challenges .
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 Rc 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.
Increasing wage structure of Danfoss Rc
– 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 Rc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Danfoss Rc with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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 Rc in the Global Business sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Danfoss Rc in the Global Business industry. The Global Business 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.
Environmental challenges
– Danfoss Rc 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 Rc can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Consumer confidence and its impact on Danfoss Rc 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.
Shortening product life cycle
– it is one of the major threat that Danfoss Rc is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Danfoss RC in China (B): Big Challenges 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 RC in China (B): Big Challenges 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 RC in China (B): Big Challenges 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 RC in China (B): Big Challenges 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 RC in China (B): Big Challenges 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 Rc needs to make to build a sustainable competitive advantage.