GROWTH STRATEGIES 1 Growth strategies introduction 1 1

GROWTH STRATEGIES

1. Growth strategies introduction 1. 1 The Growth Strategies Matrix 1. 2 Diversification - Related - Unrelated 1. 3 Vertical Integration - Backward vertical integration - Forward vertical integration 1. 4 Outsourcing 2. Denmark Export Canon § Locomotives (Arla Food, Carslberg, ISS, Novo Nordisk, DSV) § The Niche Champions § The Merchants § The Green Front Runners § The Welfare Exporters § The Super Designers § The Chameleons § The Born Globals 3. Project – DLG Group Locomotive

When a company decides to enter into new market or the development of new products, it should considered the different types of corporate strategy directions that the management can follow: Growth strategies matrix: v MARKET PENETRATION: to introduce existing products into existing markets. v. PRODUCT DEVELOPMENT: to introduce new product/service into existing markets. v. MARKET DEVELOPMENT: to introduce existing products/services into a new market. It can take two forms: new users or new geographies. v. CONGLOMERATE/Unrelated DIVERSIFICATION: to introduce new product/services into new market. All these direction can entailed the diversification process: -Diversification: to increase the range of products/servies served by an organisation. - Related Diversification consists of diversifying into products/services with relathionships to the existing business. (SONY went from Walkman to MP 3 s) - Unrelated diversification consists of diversifying into new products/services with no relathionship to the existing business.

Another direction of growth strategies is the outsourcing process, which is the process by which activities previously carried out internaly are subcontracted to external suppliers.

Another direction for corporate startegy can be vertical integration. This directoin entails to enter activities where the organisation is its own suppliers or customers. Vertical integration can go in two direction: a. Backward integration: It involves the purchase of suppliers. Activities related with the inputs. Benefits: improved efficiency, cost savings, cut transportation costs, firm more competitive. For example: the acquisition by a car manufacturer of a component supplier. If a bakery business bought a wheat processor and a wheat farm. b. Forward integration: it involves the purchase or control of distributors. Activities related with the outputs. For example: if a bakery sells its goods itself at local farmers markets or owned a chain of retail stores, through which it could sell its goods. Vertical integration increases the corporate score within an organisation. It brings together activities up and down the same value network. By contrast, diversification involves more or less value network. Diversification is someties referred as Horizontal Integration.

Horizonatal integration: The acquisition of additional business activities that are at the same level of the value chain in similar or different industries. Because the different firms are involved in the same stage of production, horizontal integration allows them to share resources at that level. If the products offered by the companies are the same or similar, it is a merger of competitors. If all of the producers of a particular good or service in a given market were to merge, it would result in the creation of a monopoly. Also called lateral integration. For example: an automobile manufacturer's acquisition of a light truck manufacturer. Benefits: economies of scale, economies or scope, increased market power and reduction in the costs associated with international trade by operating in foreign markets.

DENMARK EXPORT CANON 1. 2. 3. 4. 5. 6. 7. 8. Locomotives (Arla Food, Carslberg, ISS, Novo Nordisk, DSV) The Niche Champions The Merchants The Green Front Runners The Welfare Exporters The Super Designers The Chameleons The Born Globals

Locomotives Key players in Denmark’s export. They generate a big amount of the country’s wealth. Leaders in their own fields Build and maintain strong competitive advantages. Leading experts in inspiring clusters. Blooming exports before 1989 Following the new trends of the globalised world 35% more productivity than their competitors in their domestic market Creators of jobs, growth and country’s wealth Food, pharmaceutical and transport industries are the most successful Danish locomotives companies (Arla Foods, DSV or Novo Nordisk) In the globalised world there is a big demand for highly mobile workforce. For example: A. P. Møller - Mærsk – Shipping Industry The A. P. Moller - Maersk Group is a worldwide conglomerate which operates in 130 countries with a workforce of over 89. 000 employees. A. P. Møller - Mærsk is Denmark's largest company and one of the largest shipping companies in the world. The group is also active in the energy sector, logistics, retail and manufacturing industries. Revenue (2013): 47 billion US Dollars Net Profit: 5. 2 US Billion Dollars

THE NICHE CHAMPIONS -They specialises and supply unique services that the rest companies cannot copy or produce. -They have a strong market position -They find gaps in the global market that are not fill out by other companies -They fill out the gaps that can bring the best exports -These gaps require high level of knowledge and skills -Competitions on: prices, knowledge + skills (capacities) -Flexible and purposeful specialisation -They quickly adapt to the customer’s way of working. - They are an excellent element for growth and success in export markets. -Premium prices in export due to the unique production in the global market. -Productivity must be improved constantly to maintain quality high and prices low.

IN DENMARK - The Danish niche operator usually win the business because it can do something that the big companies cannot. It could be the case that large companies (competitors) have 10 finished products in stock, but the little Danish niche operator wins the order because it can make a partnership with the customers for a tailored solution. -Almost fifth of Denmark’s total export comes from this niche product. Therefore Denmark is at the top among the other European companies providing unique services and therefore it adds a special competitive advantage for the Danish niche champions. -They connect Denmark to the rest of the world. - Hidden world champion: This category collaborates with small and medium niche players, who are nearly outside Denmark’s borders. And the customers are typically other companies using the niche products in their own production. -Examples of danish companies: a. DLF-TRIFOLIUM: a global leader supplier of seeds to farmers all over the world and responsible for the turf at the world’s best football pitches. b. Welltec: they manufacture robots that facilitate the oil extraction. c. FOSS, who supplies advanced measuring equipment for the food industry to improve food safety.

EXAMPLE OF NICHE CHAMPIONS DLF-TRIFOLIUM is a leader in the global market within the specialist niche of grass seeds. The company has supplied grass seeds for prestigious events such as the World Cup in South Africa in 2010 and the 2012 London Olympics. DLF-TRIFOLIUM in recent years has increased a rapid growth and currently enjoys a 50 per cent market share in Europe and a 25 per cent market share globally. The company recognizes that the secret behind DLF-TRIFOLIUM's success is research and development. One in ten of the company's approx. 650 employees only have one focus: to refine the different grass types. DLF-TRIFOLIUM works in different areas: football pitches, tennis courts and golf courses but it has also added two more areas in their services: forage grass for farming and turf for standard residential gardens. Each area requires something specific and each type of grass needs to be adapted in different climates, which requires more research, specialisation and development.

THE MERCHANTS • The ability to negotiate, to always get a good price and create a long-term and trustful relationship with the customer is a virtue typical of the most successful merchants in export markets. • Even if the head office is in Denmark, creating value across borders is what counts in an age of globalisation. • Success is also about being driven by the process to do a good Deal “Buy cheap and sell dear” But do it properly so that both seller and buyer want to do business again. • The most successful Danish Merchants are able to. . . maintain flexibly and agility. . . revert to the original core business in the local market. . The Merchants focused on product innovation, service and physical presence in growth markets

IN DENMARK Only a few of Denmark’s retailers have penetrated the important markets in neighbouring countries. Only a very limited number of Danish retailers have successfully exported to growth markets as far away as China. By the end of 2013, the Danish owner of the visible Danish brands and brand group BESTSELLER, expects to have opened store number 10, 000. In China alone, BESTSELLER Fashion Group China has over 6000 stores, which the family-owned company runs in collaboration with the team behind BESTSELLER in China. The enormous growth in international markets has been driven by the BESTSELLER DNA: doing good business. BESTSELLER became the retail chain with the most shops in the world, thanks to its strong business acumen The Danish-owned fashion brands from BESTSELLER are currently more visible on the world’s high streets than Swedish Hennes & Mauritz and Spanish Zara. Part of the secret behind the successful fashion company from central Jutland is located in family ownership and a rootedness in the fundamental value that good business acumen equals long-term relationships and reciprocal partnerships. BESTSELLER has been working with the same suppliers for many years, some as many as 30 years, and many have grown alongside the company.

THE GREEN FRONT RUNNERS • The ability to simultaneously set ambitious climate, energy and environmental targets while also maintaining a position as one of the world's most competitive nations has placed Denmark as an international benchmark for conversions to green energy. • Denmark not only offers one of the world's most ambitious energy and climate plans with targets such as the complete elimination of the use of fossil fuels in the energy and transport sector. • Denmark also uses the more wind power as part of its energy system than any other country in the world and it has also contributed to environmental and energy-efficient Technology Within Europe, Denmark is the country in which energy technology represents the biggest share of total exports (10%). This is due to several decades of ambitious energy saving plans, forward-looking environmental legislation and demanding, environmentally conscious consumers. . Wind turbine manufacturer Vestas became the world's biggest and to the lead in a Danish wind power cluster, which also attracted ambitious foreign competitors because of its strong skills.

THE WELFARE EXPORTERS The Welfare Exporters suply medicine, care equipment, hearing aids and high quality service solutions. Companies such as Coloplast, Falck, Oticon and Systematic are all exporters that have gained strong positions in a wide and fast growing market for welfare solutions. They have been relentless in their hunt for quality and innovation. THE SUPER DESIGNERS Designed in Denmark' has become a global brand that strengthens competitiveness, increases export, profiles Denmark and enables the sale of products and services at a higher premium price in the world market. Examples: ECCO’s Shoes, LEGO’s bricks and Fritz Hansen’s furniture Design or Henning Larsen’s architectural masterpieces. Characteristics: Aesthetics, functionalism and a thorough understanding of users' needs and behaviour.

THE CHAMELEONS The Chameleons reinvent themselves and thoroughly transform their former business. They have made a strategic U-turn and found new ways to success on the global market. The chameleons are the most innovative and bold companies, and with a strong and purposeful management that help and support them for such radical transformations For example: - Fertin Pharam, emerged from the chewing gum company Dandy, where they have gone from producing sweets to producing medicine. - FLSmidth, which in order to combat a sudden threat from a cheap Chinese competitor, had to give up its traditional way of thinking the cement industry and develop a completely new supply chain and service concept.

THE BORN GLOBALS The Born Globals are international players from the day they were born. They are considered as growth companies that have always traded globally These companies have become global at express speed, and they have enjoyed higher growth rates and better job creation than other Danish companies. One example is the manufacturer of fruit concentrate, Orana, which was global from the start and they continue to sell concentrate to juice manufacturers in more than 40 countries. ✳ A strong and successful management willingness to take risks, ability to make decisions and a purposeful strategic focus at senior management level. ✳ Agility and the ability to adapt rapidly. ✳ Localisation and a strong national position do not work against globalisation. Local market knowledge, good language skills and cultural understanding are important components. ✳ Staying close to customers. ✳ Ambition in all areas. Without sky high ambition and demands on employees, managers, products, services, design, research and development, you cannot attain world-class level and compete with the best in the world. ✳ A constant eye on future trends and tomorrow's market requirements.

This modul is focus on Growth Strategies. The poject for this model is the following: You need to consider yourself a representative of your chosen company that has been asked by the Danish Export Council to present the categories where Denmark excels. For this purpose you are going to participate in a conference as a speaker, talking about your selected industry and explain how Denmark excels in this industry and identify factors that may pose a threat or an opportunity for the category. Besides this your presentation should also include a short introduction to your company focusing on your specific competitive advantages. In order to do that you need to include elements of growth strategy theory, export knowledge and descriptive economics. The audience will be representatives from potentially new markets.

The category assigned to my group and I was Locomotives and we decided to focus our project on the Danish company “DLG Group”. The DLG Group is one of the largest agricultural companies in Europe and is currently owned by 30, 000 Danish farmers. In addition to agricultural products, the group's activities also include supplying vegetables to the catering and retail trades, electricity trading, telecom, pot plant sales, etc. these activities are split up between many smaller companies, which again are organized in to four groups. This mean DLG in an Umbrella company. They have one mean company (dlg) and a lot of other company, which are, own or work with this main company. 1969 - DLG is a cooperative which was formed in 1969, when the company’s JAF, Jydsk Andels Foderstofforretning (1898), ØA, Øernes Andelsselskab for Indkøb af Foderstoffer (1901) , and DAG, Dansk Andels-Gødningsforretning (1901) was put together( fused). 1994 - DLG buys up superfos Grovvare 1999 - DLG buys Fyens andels-foderstofferretning (FAF) Dlg says that their main value is Innovation. They have chosen to be innovative especially with their production, where they focus on optimizing their production methods, and developing their products. The strategic focus of dlg is on expansion both in and out of Denmark. Dlg is presently represented in over 20 country by different father companies like Ha. Ge (Germany), Svenska foder (Sweden), Scandinavian farmers (Baltic region). Dlg is also one of the biggest exporters of malt, seeds (and much more) in Europe In 2014 they had 7500 people working for them where 3000 of them where in Denmark. What is next? : They don’t have any preside data on this but say in their promo movie that they are also expanding in to the Asian markets (china) right now and are looking for new options.

They strive to do everything smarter, faster and more efficiently in innovation for grains and energy efficient farming machines in order to insure that they can constantly develop and deliver new services and products to excising and new markets. Product Development ( new products + existing market) By creating grains that can grow in different climate and withstand harsh weather conditions, the most effective fertilizers to help them grow as well as advice on the most effective way of farming crops for the largest crop sizes possible. Their main focus in service and energy is to create more effective machinery and logistics solutions in order for DLG to save costs and create a higher turnover for both customers and owners. Market Penetration (existing products + existing markets) By acquiring small companies under its umbrella, DLG is increasing the share of current markets with its current product range. DLG is focused on 9 different activities ( animal nutrition, plant cultivation) related to the agricultural industry and all of them are managed by a lot of other companies that work under the main company, DLG. The main benefit is to stay current and continue to create value for owners and customers by Internalization and interaction within subsidiaries and collaboration with Universities for the newest of technologies.

The end Adela García González Marketing Management Module 3, Second semester