Coloplast Case Essay

Executive abbreviationColoplast has been in effects in Denmark for around 60 years. The companionship specializes in producing medical devices much(prenominal) as disposable ostomy bags, antimycotic cremes cleansers and moisturizers. For 42 years, all Coloplast surgical processs were contained inwardly Denmark, however 97% of its tax revenue enhancement was generated by exporting its products beyond its national borders. In 1999 the ac community changed its philosophy and began to investigate rack up shoring its labor facilities. In 2001 the get-go Coloplast outturn facility opened its doors foreign of Denmark. The magnification took place in Tatabanya Hungary. This side was chosen because of cheaper labour and land rates, as well as a to a greater extent favourable tax rate. The city is dictated in the Western region of the rural area which provided better infrastructure. Coloplast had no blueprint to voyage through the expansion process, and had to learn and ruin trump out practises by trial and error.By 2004 the focal point team in Tatabanya had go the production remains to the point where it was outperfor minute of arcg the endless established danish pastry facilities. In 2005 Coloplast revealed an raptorial stick out of Strategy 2008. In this plan the company states it go away strive to contact a scratch margin of 18% charm maintaining 10% organic conjure upth. A key pillar of this plan is the continue relocation of passel production to Hungary and encourage expansion to China. Coloplast is at crossroads, it of necessity to resolve if it has well-read enough from its first foreignistic expansion that it bottom duplicate and re material body its success in innovative locations, or if it should delay revolutionary- do locations and heighten on book tuning its operations in Denmark and Hungary. IssuesColoplasts expansion into Hungary was executed with no prior international expansion follow out to draw from. E ventually over condemnation, it prove to be a sure-fire operation which surpassed quality levels of its danish facilities . The company believes it washstand successfully take the lessons learned in Hungary and apply them to other international locations. Coloplast similarly believes that the Tatabanya operation could still be fine tuned and improved to improve its results even get onwards. about of the problems that need to be improved upon are. cognition communion / Communication stylesThe production expansion in Hungary has revealed to Coloplast that decentralized approach to noesis sharing may not tame in all situations or locations. The gray configuration in Denmark had closely facilities and provide within a 30 min drive from each other. This allowed for more station contact amid facilities sharing processes, best practises, policies and ideas. This approach was not as successful in Hungary, Tatabanya is far from danish home arrive atice and needed to bef ool a very much more direct approach. The decentralized system actually put the Magyar operation at a disadvantage as there was a lack of manuals and instruction manual for them to go with in any language, not equitable Hungarian. Accounting procedure Danish Kronner gold93% of all products created by Coloplast was exported outside of Danish borders, this allowed the company to choke much larger markets so just its small municipal population. When an order is eyeshaded it is through so in the Kroner, the topical anaesthetic Danish currency. This forces the company to mass meeting currency on the majority of all its transactions, exposing a currency risk if not managed carefully. It was estimated that currency qualify contributed up to 2% of overall loses in 2004. Outsourcing jobs prejudicious impact on Danish custodyColoplast has a large association pool of its existing manpower in Denmark. With its volume production facilities shifting to hot markets it is find ing it challenging to maintain its Danish get goingforce in their existing roles. The company would akin to be loyal to its Danish workforce and keep them employed, maintaining highschool morale. Coloplast would like to avoid pricey rift payments and negative public relations of minify rung in Denmark while expanding operations internationally. synopsisColoplost needs to continue to expand and grow it business. Internal estimates indicate that by 2010 the company bequeath require double its ongoing product volumes. At the same time they call for set aggressive profit margin and emergence goals. The international production expansion strategy is an important let on of its goals. Coloplost hopes to meet the growing demand of its customers and achieving revenue goals by expanding production facilities in countries with disdain operate cost One of the lessons learned by Coloplost after the expansion in Hungary is the importance of the transfer of knowledge and confab ulation between all segments of the business. This area needs to be improved prior to further expansion to China. During the last expansion prudence was so busy dealing with communication issues that they failed to fully take advantage of local sourcing opportunities, instead importing more expensive selections. Management in Denmark must alike decide how to properly utilize their domestic workforce, when many of their current production positions are shifting to new countries.This allow for be a very important de enclosureination as these employees hold a high level of tacit knowledge of the company that it does not want to lose. The reporting of sales/conversion back to Danish currency represented a 2% loss. act expansion into new markets in two production and sales bequeath piss this issue even larger then it currently is. It is in the companies best stake to retain its Danish workforce when possible. These employees have the best chthonianstanding of the operations and can contribute to the companies success in planning and perfecting best practises instead of focusing on production. Coloplost is still in a growth phase and redeployment/training of these plenty leave save on fault costs and maintain a electropositive image for the company. RecommendationsBy improving the Hungarian operation and exploring further expansion opportunities such as China the company is demonstrating how infixed expanding into low cost markets is to its overall grand term strategy. A presence in the Asian marketplace give conk out Coloplost to a massive consumer base to piss its sales. This international market diversification will reduce the companys dependency on its traditional European customers whos health care systems are under reform and potentially not as profitable as before. A new strategy must be organise for the changing European markets, by expanding revenue streams, it provides the company time to assess realness of the new market conditio ns. Another attain of having operations in Asia is increasing logistics options for the Coloplast. A Chinese dispersal point could overly be created providing better coverage in Asia and potentially shipping to spousal relationship the States as well. The Danish location will continue to ship to Hamburg and export to northward Europe while the Hungarian facilities will by pass by-pass Hamburg and ship straightaway to Southern Europe.This plan will contour 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 in size due to the off shorin g process. The company should select their most experienced and specialized stave 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 come up its accounting procedures and no longer banknote 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 subsequent 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 succeeding(prenominal) 5 years. It is best to get ahead of it and continue to offer early privacy and retraining packages to its employees. By utilizing its most familiar 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 dish out keep staff reduction to a minimal. AlternativesDelay further expansion focus on improving Hungarian operations This option will make it arduous 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 piece of land best practises among all operations micturate 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. schooling of a team from experienced staff to assist in trying to lineage products locally m ay be a win win scenario. Keep Danish staff employed while reducing costs for the company. These employees would know systems best. Creation of auxiliary distribution points to better serve new markets. China could handle Asian and North American markets, Hamburg (Danish port) could handle traditional northern European markets and a new distribution point could be created to funnel Hungarian supplied products to Southern Europe and beyond