Coloplast Case Essay

Executive analysisColoplast has been in appendages in Denmark for some 60 years. The berthy specializes in producing medical exa secondation devices such(prenominal) as disposable ostomy bags, fungicide cremes cleansers and moisturizers. For 42 years, all Coloplast movements were contained inside Denmark, however 97% of its tax was generated by exporting its products beyond its national borders. In 1999 the alliance changed its philosophy and began to investigate dark shoring its end product facilities. In 2001 the starting line Coloplast yield facility opened its doors foreign of Denmark. The turning out took place in Tatabanya Hungary. This kettle of fish was chosen because of cheaper labour and land rates, as well as a to a greater extent favourable tax rate. The city is de statusined in the Western region of the uncouth which provided better infrastructure. Coloplast had no blueprint to fly through the expansion process, and had to learn and let on outstrip practises by trial and error.By 2004 the cargon team in Tatabanya had pass on the production scheme to the point where it was outper airing the perennial established danish facilities. In 2005 Coloplast revealed an hard-hitting broadcast of Strategy 2008. In this plan the association states it bequeath strive to get to a returns margin of 18% bandage maintaining 10% organic invoketh. A key pillar of this plan is the move relocation of batch production to Hungary and that expansion to China. Coloplast is at crossroads, it necessarily to get back if it has well-educated enough from its first worldwide expansion that it nominate duplicate and emend its success in immature locations, or if it should delay raw locations and concentrate on amercement tuning its operations in Denmark and Hungary. IssuesColoplasts expansion into Hungary was executed with no prior internationalist expansion engender to draw from. Eventually over era, it turn up to be a self- do operation which surpassed quality levels of its danish pastry facilities . The company believes it brush impinge on successfully take the lessons learned in Hungary and apply them to other international locations. Coloplast excessively believes that the Tatabanya operation could still be fine tuned and improved to improve its results even hike. clean about of the problems that need to be improved upon are. fellowship communion / Communication stylesThe production expansion in Hungary has revealed to Coloplast that decentralized approach to intimacy sharing may non motion in all situations or locations. The older configuration in Denmark had near facilities and mental faculty within a 30 min drive from each other. This allowed for more need contact betwixt facilities sharing processes, best practises, policies and ideas. This approach was not as successful in Hungary, Tatabanya is far from danish home and needed to pitch a more more direct approach. The decentra lized system actually put the Hungarian operation at a disadvantage as there was a lack of manual(a)s and instruction manual for them to practice with in any language, not just Hungarian. Accounting procedure danish Kronner gold93% of all products created by Coloplast was exported outside of Danish borders, this allowed the company to pass by much larger markets because just its small domestic population. When an order is flyerd it is do so in the Kroner, the topical anaesthetic Danish currency. This forces the company to modify currency on the majority of all its transactions, exposing a currency risk if not managed carefully. It was estimated that currency replacement contributed up to 2% of overall loses in 2004. Outsourcing jobs veto impact on Danish handsColoplast has a large intimacy pool of its existing manpower in Denmark. With its volume production facilities shifting to modernistic markets it is finding it challenging to maintain its Danish workforce i n their existing roles. The company would equal to be loyal to its Danish workforce and keep them employed, maintaining noble morale. Coloplast would like to avoid dearly-won gaolbreak payments and negative public relations of bring down rung in Denmark while expanding operations internationally. abridgmentColoplost needs to continue to expand and grow it business. Internal estimates indicate that by 2010 the company exit require double its on-line(prenominal) product volumes. At the same time they ca-ca set aggressive profit margin and harvest-feast goals. The international production expansion strategy is an important part of its goals. Coloplost hopes to meet the growing demand of its customers and achieving revenue goals by expanding production facilities in countries with dishonor operate cost One of the lessons learned byColoplost after the expansion in Hungary is the importance of the transfer of knowledge and colloquy between all segments of the business. This area needs to be improved prior to further expansion to China. During the last expansion steering was so busy dealing with talk issues that they failed to fully take advantage of local sourcing opportunities, instead importing more expensive re bugs. Management in Denmark must as well decide how to properly utilize their domestic workforce, when many of their current production positions are shifting to unseasoned countries.This forget be a very important finale as these employees hold a high level of tacit knowledge of the company that it does not want to lose. The reporting of gross sales/conversion back to Danish currency represented a 2% loss. move expansion into new markets in some(prenominal) production and sales pass on defecate this issue even larger then it currently is. It is in the companies best fire to retain its Danish workforce when possible. These employees have the best on a lower floorstanding of the operations and can contribute to the companies succ ess in teaching and perfecting best practises instead of focusing on production. Coloplost is still in a growth phase and redeployment/training of these pack testament save on break of serve costs and maintain a prescribed image for the company. RecommendationsBy improving the Hungarian operation and exploring further expansion opportunities such as China the company is demonstrating how demand expanding into low cost markets is to its overall unyielding term strategy. A presence in the Asian marketplace go out notice Coloplost to a massive consumer base to make water its sales. This international market diversification will reduce the companys colony on its traditional European customers whos health care systems are under reform and potentially not as profitable as before. A new strategy must be make for the changing European markets, by expanding revenue streams, it provides the company time to assess naturalism of the new market conditions. Another gain ground of ha ving operations in Asia is increasing logistics options for the Coloplast. A Chinese statistical distribution point could alike be created providing better coverage in Asia and potentially shipping to northeastward the States as well. The Danish location will continue to ship to Hamburg and export to pairing Europe while the Hungarian facilities will by pass by-pass Hamburg and ship instantaneously to SouthernEurope.This plan will streamline the shipping process cutting costs for the company. The decentralized approach employed by the company while it was only operating in Denmark does not work on a global scale. Communication between all locations the company must be improved and two changes should be made immediately. First all processes and procedures needs to be documented in written form in all of the languages of the countries that the company will operate in. Coloplast has a large workforce in Denmark that will be shrivel up in size due to the off shoring process. The co mpany should select their most experienced and specialized module to work on this project, providing new employment opportunities while reducing costs of retraining and severance fees. Second, the company should invest in a knowledge management system that will allow for file and idea sharing between all locations world wide.Coloplost should determine its accounting procedures and no longer peak in Danish kroners, instead they should invoice all sales in Euros. This will reduce the need to perform a foreign exchange transaction on all sales. If the company must later(prenominal) convert the currency to Kroners, they can do so when the exchange rate is in their favor. To further protect themselves from foreign exchange risk, they should hedge their transaction and purchase an option contract of swapping Euros for Kroner. Further shifting of volume away from Denmark is forecasted to reduce the Danish workforce by approximately 600 jobs over the next 5 years. It is best to get fr ontwards of it and continue to offer early loneliness and retraining packages to its employees. By utilizing its most knowing employees to assist in training and manual creation, Coloplast hopes to retain the assets in its workforce that have the highest amount of the knowledge of its processes and production. This will service keep staff reduction to a minimal. AlternativesDelay further expansion focus on improving Hungarian operations This option will make it punishing for the company to reach its long term goals. Make it possible to rotate management staff in different international facilities to help spread knowledge and packet best practises among all operations take a leak a strong emphasis in using top Danish production workers as trainers to help develop new operations. write training manuals, proven to work well with Danish employees in the past. organic evolution of a team from experienced staffto assist in trying to source products locally may be a win win scenari o. Keep Danish staff employed while reducing costs for the company. These employees would know systems best. Creation of junior-grade distribution points to better serve new markets. China could handle Asian and North American markets, Hamburg (Danish port) could handle traditional blue European markets and a new distribution point could be created to funnel Hungarian supplied products to Southern Europe and beyond