The Global Challenges

New book analyzes 8 large Danish companies

Coloplast, Danisco, Danfoss, Ecco, GN ReSound, GPV, MAN B&W Diesel and Ribe Maskinfabrik.

The eight companies are very different from each other regarding size, industry, ownership and customers, however, they also have a number of things in common. They have all carefully considered their global strategies, and they all hold key learning points to add to the Danish debate about the role of companies in the globalization – that is to disintegrate value chain activities.

Disintegration of value chains

“The companies that are far advanced in dealing with the global challenges have typically disintegrated their value chain activities in a way so that the more standardized and routine activities have been relocated to low-pay countries, while creative and innovative activities stay in Denmark. In this way, it is possible to maintain a focus on core activities in Denmark,” says Torben Pedersen, Professor at CBS.

The Danish company, Coloplast, is an example of the disintegration of value chains. The company has maintained the early phases of production and prototype and ramp-up production in Denmark, while the large-scale production is relocated to Hungary. The early phases of production is characterized by great leaning results in cooperation with the development department, and they demand a large degree of communication, while the largest cost savings are found in the large-scale production.

Ribe Maskinfabrik has taken a more drastic action by closing down a large part of the metal processing in Denmark, and instead they concentrate on production from a network of suppliers in Poland and other Eastern European countries. In the process, Ribe Maskinfabrik has changed its role from being a production facility to acting as a “coordinator” of the value chain activities with a network of suppliers. Today, the company makes a living by acting as agent between Danish customers and their network of suppliers in low-pay countries.

The companies have faced barriers

While the companies typically have been well prepared to face challenges in relation to the actual establishment in a low-pay country, the study shows that internal barriers are often underestimated.

“First and foremost this applies to mental changes among employees and management but also to standardizations of reporting and communications systems. The reason for the underestimation is that international activities are often viewed as a small appendix to existing activities. Mental and process-oriented changes internally in the company are key factors in order to maximize international activities,” concludes Torben Pedersen.

Jacob Pyndt, Consultant at Deloitte and Torben Pedersen, Professor at CBS, have published the book “Managing Global Offshoring Strategies – A Case Approach”: