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Coloplast A/S—Organizational Challenges in OFFSHORING

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Harrison Zhang

on 19 March 2014

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Transcript of Coloplast A/S—Organizational Challenges in OFFSHORING

Coloplast A/S—Organizational Challenges in OFFSHORING
Background & Operations
Internal Challenges
External Environment
Demographic /Social Analysis
Political Legal & Economic
Global & Technological
Porters Five Forces
Firm's competitors and resources
Critical Issues
Discussion & Recommendation
Coloplast A/S Operations
Production Relocation:
Denmark to Tatabánya, Hungary

Allan Rasmussen

Plant Manager of Colopast’s Hungarian subsidiary (2001 to 2004; 3.5 years)
Managed a staff of 550
Director of Coloplast’s Danish subsidiary 2005
Lars Rasmussen

Chief Operating Officer of Coloplast
Needed 50% more manufacturing space by 2010
10 % organic growth rate

Internal Challenges
Operational assumptions and activities
Significant changes to exploit the full potential in Hungary
Interdependent relationship between the Danish and Hungarian operations
Lack of knowledge transfer from the Danish operators to the Hungarian operators
Development of new task areas and roles for Danish workers

Road Map
Coloplast A/S Background
Founded by Elise Sorensen in 1954
Worlds first self adhesive, disposable, ostomy bag
Plastic Manufacturers
Lack of business potential
Nurse backing
By 1957, half of production exported
This trend increased to 97% by 2005

Chronic Care Products:
Ostomy/urology care
continence care
wound care
skin care
breast care

External Environment Demographic/social

Coloplast depends on two lines of products
Health care system in developed countries cooperation has drove prices down

Political/legal & Economic
lower taxes
Political stability
Legal issues related to defective products

Lying off employees in Denmark
Prosperous economic conditions in the relocated country.

Global & Technological Environment
97 per cent of Coloplast revenue was generated from overseas
Sales were sustained through multiple subsidiaries
Relocating to China is still on progress

Technology improvement might decrease the need for ostomy bags

Porters Five Forces
Firm’s resources
Production workers
- 900 staffs too double its product volume
Production system

Pilot production phase
- R&D, design and marketing
Ram-up phase
- resources of in building and fine-tuning
Volume production phases
Range care
Function for plant conjunction
primary support functions
- quality, engineering, maintenance, planning and logistics.

Secondary support functions
- information technology
(IT), facility management and accounting

Competitor Environment
Firm’s resources Cont
Managerial resources
save 66% if Coloplast Hungary buy directly from Hungarian
- tackle operational inconsistencies in the machinery
Adhesives technology
– important resource of manufacturing
Production planning systems
each production units has its own unique production planning
Programmable logic controllers (PLCs)
control and manage automatic production machines
Human resources

Critical Issues Related to Offshoring
Management and Operational Issues
Systems and the transformation of organizational structures
HR management
Learning effects
Regulations, Rules and Production Systems
Changes are NECESSARY
Discussion and Development Solutions
Significant operational changes needed to be in place in order to exploit the full potential of the Hungarian subsidiary.

How to get raw materials?
How to distribute finished goods?
How to transfer tacit knowledge between different locations?
How to communicate effectively?
Developing mentoring system
Transfer of knowledge
Comprehensive relocation strategy
Indepth study
Expand client base
Internal communications platform
Centralized system
Annual Reports. (2013, October 31). Retrieved March 5, 2014, from Coloplast: http://www.coloplast.com/Documents/Investor%20Relations/Annual%20reports/GB/Annual%20report%202012-13.pdf

Coloplast a/s. (2005, May 26). Retrieved from http://www.coloplast.com/Documents/Investor Relations/Presentations/2004-5/H1/DDF 26-05-2005 - Coloplast.pdf

Mesko, J. (2014, March 5). Coloplast Settles Hundreds of Vaginal Mesh Lawsuits for $16M. Retrieved March 5, 2014, from DrugWatch: http://www.drugwatch.com/2014/03/05/coloplast-settles-mesh-lawsuits/

Nielsen, B., Pedersen, T., & Pyndt, J. (2008). Coloplast - organizational challenges in offshoring. Ivey - Richard Ivey School of Business,

Critical Issues Related to Offshoring Cont
General marketing environment and political/economic policies will influence the company's strategies

Is it too risky for the company that 97% revenue was generated outside Denmark

Some risk factors
Thanks for your listening
Q & A
Full transcript