Coloplast has been in operations in Denmark for nearly 60 years. The company specializes in producing medical devices such as disposable ostomy bags, antifungal cremes cleansers and moisturizers. For 42 years, all Coloplast operations were contained within Denmark, however 97% of its revenue was generated by exporting its products beyond its national borders. In 1999 the company changed its philosophy and began to investigate off shoring its production facilities. In 2001 the first Coloplast production facility opened its doors outside of Denmark. The expansion took place in Tatabanya Hungary. This location was chosen because of cheaper labour and land rates, as well as a more favourable tax rate. The city is located in the Western region of the country which provided better infrastructure. Coloplast had no blueprint to navigate through the expansion process, and had to learn and develop best practises by trial and error. By 2004 the management team in Tatabanya had advanced the production system to the point where it was outperforming the longer established Danish facilities. In 2005 Coloplast revealed an aggressive plan of Strategy 2008. In this plan the company states it will strive to achieve a profit margin of 18% while maintaining 10% organic growth. A key pillar of this plan is the continued relocation of volume production to Hungary and further expansion to China. Coloplast is at crossroads, it needs to decide if it has learned enough from its first international expansion that it can duplicate and improve its success in new locations, or if it should delay new locations and focus on fine tuning its operations in Denmark and Hungary. Issues
Coloplast's expansion into Hungary was executed with no prior international expansion experience to draw from. Eventually over time, it proved to be a successful operation which surpassed quality levels of its Danish facilities . The company believes it can successfully take the lessons learned in Hungary and apply them to other international locations. Coloplast also believes that the Tatabanya operation could still be fine tuned and improved to improve its results even further. Some of the problems that need to be improved upon are. Knowledge sharing / Communication styles
The production expansion in Hungary has revealed to Coloplast that decentralized approach to knowledge sharing may not work in all situations or locations. The old configuration in Denmark had most facilities and staff within a 30 min drive from each other. This allowed for more direct contact between facilities sharing processes, best practises, policies and ideas. This approach was not as successful in Hungary, Tatabanya is far from Danish headquarters and needed to have a much more direct approach. The decentralized system actually put the Hungarian operation at a disadvantage as there was a lack of manuals and instructions for them to work with in any language, not just Hungarian. Accounting procedure - Danish Kronner currency
93% of all products created by Coloplast was exported outside of Danish borders, this allowed the company to reach much larger markets then just its small domestic population. When an order is invoiced it is done so in the Kroner, the local Danish currency. This forces the company to exchange currency on the majority of all its transactions, exposing a currency risk if not managed carefully. It was estimated that currency exchange contributed up to 2% of overall loses in 2004. Outsourcing jobs negative impact on Danish workforce
Coloplast has a large knowledge pool of its existing workforce in Denmark. With its volume production facilities shifting to new markets it is finding it challenging to maintain its Danish workforce in their existing roles. The company would like to be loyal to its Danish workforce and keep them employed, maintaining high morale. Coloplast would like to avoid expensive severance payments and negative public relations of...
Please join StudyMode to read the full document