How Oticon Has Identified Its Competitive Priorities - Case Study Example

Oticon Hearing Aid Technology Company Affiliation Introduction Oticon is a Danish hearing aid technology company. The company was the pace setter in the hearing aid industry in the 1970s. Currently, it is the largest manufacturer of hearing aid instruments. The company is located outside the Danish capital Copenhagen. Hans Demant started it in 1904. The wife to Mr.Demant had a hearing problem and this inspired him to establish the company. The company’s worldwide reputation lies in its innovative strategy and management. It is known widely for the management technique called the spaghetti organization. Mr. Lars Kolind initiated the outstanding style of management when he was the organization’s chief between 1988 and 1998. The reputable company operates as a subsidiary of the larger William Demant Holding Group. Oticon has branches in many countries thus necessitating sufficient leadership acumen and a top-notch operation strategy. For instance, their manufacturing plant is located in Poland. The company’s profile boasts of over 2990 employees in the globe. Oticon operates in the hearing aid business sector with several brands. These include; Alta, Safari, Dual, Acto, Hit, Amigo, Intiga, Ino and Niro. Other more established product lines are Epoq, Vigo, Delta, Lexis, Syncro, Teqo, Go and Go pro among others. Because of the changing commercial landscape in the industry, the company has adopted numerous strategies aimed at keeping the company afloat. Capabilities Oticon possesses a basic research department in its company production facilities and has strategically positioned itself to be the preferred business partner for leading hearing aid centers worldwide. It is the company’s major strength. In line with this philosophy, Oticon has usually emphasized the quality of their products. They have a firm reliance on their engineering and product design. Nonetheless, towards the late 80’s, consumer demand changed from needing a relatively significant, high quality device behind the ear to a more distinct unit inside the human ear. The new trend of customer preferences was intensely exploited by its competitor in the United States. As a result, Oticon, who was the industry’s market leader in 1979 until late 80’s was encountering a drastic decrease in market share. The decline in market share was significantly seen in the United States market. In 1986, the company experienced its first-ever financial loss (Shurab, 2013). A key milestone in the 100 years of Oticon’s existence was the successful implementation of the strategic positioning and change captained by Lars Kolind in response to adjustments to the operating business atmosphere and environment. The strategies resulted to several operational changes. The strategy was to modify in depth the culture, overall management and structure of the entire organization. Apart from the dimension of the efficient policy positioning, there are other dynamics that need to be examined deeply such as change typologies, strategies, prompts, driving elements and obstructions including the level of usefulness of this approach. There are diverse change typologies. In a majority of cases, incremental procedures of strategy are geared more to shifting the activities, routine, behavior, approaches of individuals and clusters. Transformational modification is solely geared towards the operational processes, arrangements and philosophy of the entire business. Business environment Oticon made use of technological advances in keeping its customers. The hearing aid commerce platform was segmented into two. These were behind-the-ear (BTE) and in-the-ear hearing aids (ITE). Most of the aids were standardized to fit a wide number of consumers. In 1991, Oticon launched the Multifocus. Multifocus was the world’s initial completely automatic hearing aid. It had no end user controls. The new device had the capacity to treat over seventy percent of people with hearing problems. The device even exceeded sale predictions by a stunning one hundred percent. It is the use of technology that shifted the fortunes in favor of Oticon. Technology applications were fused with soft skills and a strategic leadership that harnessed all these strengths and diversities to one potent goal. The goal was innovation for success. Innovation in technology is how PESTLE helped revamp Oticon to a world status. After his recruiting, though young and with no much previous leadership qualification, Lars Kolind struggled to get the company into competition. He introduced drastic measures aimed at controlling the costs. All the expenditures made in the enterprise had to be specifically approved by him or else it will not be implemented. Cost reduction strategies went on for a long time and after some few years, the objectives of reducing costs were noticeable. What was surprising was that only peripheral savings could be realized from continued cutting of costs and traditional automation of production processes. Attention was shifted to crucial restructuring and reorganization of the capital office in Denmark (Bock, 2011). Kolind’s sweeping strategy was to renovate Oticon from the usual industrial orientation that is focused in producing high-tech standard hearing supports. The next phase of innovation was to make the company a top-rank service organization with physical merchandise. The company envisioned by Kolind was one where different functional units worked in a system that unites all aspects of the organization. The strategy was branded the spaghetti tactic. Units were to function in unison and an integrated method to craft creative and innovative consumer focused products. The company wanted a strategy that was genuinely interested in and swiftly responsive to customer demands. These innovative changes could not be realized by typical bureaucratic or structural measures. Necessity demanded that the creation of a radically fresh, groundbreaking, flexible and learning group. As Kolind struggled with a breakthrough strategy, he explained how he thought and contemplated the impossible. He possessed a vision for the future and how the company will operate an organization in which jobs would be designed to fit the individual rather than individuals fitting into the jobs. In his dream and vision, he wanted every employee to be trusted with greater duties after which the job would arise by the person amassing a portfolio of roles. The vision was thus christened the “spaghetti organization” since the functions the employees were to handle were deeply intertwined (Morgan, 2011). In the first step, the headquarter and the management offices were formerly situated in different office blocks. In the new strategic position, these two centers of control were merged into a wholly new office block. The action of this merger was inspired solely by a desire to achieve the fresh strategic elevation as a portion of the organizational transformation. There are other groundbreaking changes that were undertaken to ensure that there was a significant reduction of overhead costs. The changes were also initiated to craft a more flexible and innovative company. There was the total elimination of conventional departments. Rather than structuring the business into the typical sections, the head office was curved into a single agency. Furthermore, all the jobs were categorized as specific projects in a bid to emphasize their nonpermanent nature. This strategy was fundamental in that it discouraged the departments from the selfishness of paying attention to their interests. Instead, the departments could now focus fully on the interests of the entire company. The new strategy also discouraged unit managers of the different departments from fighting for authority and power. The managers used to fight for power for their individual sections as opposed to those of the whole organization. The absence of divisional sections further enhances the concept of flexibility in reacting to impromptu work demands. In addition, to check competition from other companies, the chief of Oticon initiated the organization of work in the form of projects to further improve efficiency. In this strategy, a project consists of a project leader who is an appointee of the top-level management and other workers. The project manager is the one mandated to source members of his or her team. He or she advertises these positions through the company’s electronic platform and specifically from his or workstation. The other employees sign up for the project from the comfort of their workstation. The procedure points to the use of technological advances in the communication system at Oticon. The projects, however much they could be involving were open to any employee. Every employee, irrespective of his or her professional inclination was given equal participatory chance. In a nutshell, no employee could own a job that no other employee could do. The concept of one-man one job specialization was ultimately done away with. The strategy advanced the skills of the staff and they could now serve in diverse roles whenever duty called. For example, it was discovered that the workers in the accounting and manufacturing department could give significant and innovative input in the making of marketing portfolio. The reasoning behind this premise was that since hearing aids were end consumer products, every employee could have an idea of how to make the gadgets not yet deciphered by the marketing experts. Moreover, involving workers from diverse origins and backgrounds into one project brought diversity into action in a resourceful manner. There was a fresh control approach. The management of Oticon reasoned that when an employee chooses to participate in a project without being forced to or appointed, more proactive results would be realized. They will prove to be quite interested in that work than if it was a top-down assignment. When an employee feels that he or she owns the job, they are bound to be more responsible. They will meet the stated deadlines easily and will also perform an excellent work. The resources that are normally controlled by the project managers are now free and can be accessed by every employee. Also, the managers are no longer monitors but leaders amongst a team of equals. Workers involve themselves in the projects and have proven to be much more effective. The job description thus left for the project managers is to wholly act as project innovators and motivators. One of the major changes at Oticon was the open layout of the office. There were no private desks even for the managers. The result was tremendous openness and morale boosting because workers thought of themselves as equals. They did away with private offices for all those who worked in the firm. Not even Kolind was spared in this dramatic move. All the staff had similar desks and chairs that are situated in the open space and only workstations on them. The philosophy behind this was that when employees interact closely with each other without any prejudices, they are likely to learn from each other and become more innovative. When and if the workers need to work as a team on specific projects with different colleagues, it was impractical to fix people in positions. Workers could choose to work from any desk at any time. There was also complete elimination of paper. Paperless office was a strategy that Kolind initiated. This is where every worker had a station of work that allows them to reach a common group of office applications and all the files required for a job in one place. Storage of information was done electronically and could be accessed from any workstation in the company but with the access keys. Business Strategy using Porter’s Forces In general, strategy is defined as the scope a company takes over a long duration of time that ultimately translates to realizing business advantages for the society. The successes are realized as a result of reconfiguration of available resources, both human and material, in the continuously transforming environment to satisfy market needs and fulfill the expectations of the stakeholders. There are drivers of strategy that necessitated a dramatic thought pattern of the organization’s competitive measures. The company was uneven with its external atmosphere. Massive registration of losses, heightened competition and advances in technology inspired the company to strategically reposition itself. Improving financial performance and striking a competitive advantage were Oticon’s goals. Considering the competitive forces strategy model, the company had to come back to life. The model talks of the dangers of the new entrants, the negotiating muscle of the suppliers, inevitable threats supernumerary products or services and the brokering power of purchasers. Porter emphasizes that there exists only three generic strategies that can easily be adopted by companies. These are cost leadership, product diversity and specialization by single-mindedness. The chief executive of Oticon reorganised his company’s vision of product differentiation and building a procedure of the company’s ideal future. He also crafted the company’s mission and communicated target statements of the desired effects. With extreme clarity, Oticon’s new mission was to assist individuals with hearing disorders to enjoy life as they imagined with the hearing capability they had. When the threats of the new entrants are sufficiently analyzed, the justification for strategy change is seen as obvious. Siemens and Sony are companies that started eating into the market share of Oticon. The two companies were coming up with other fascinating products that could also aid hearing. The two organizations employed massive technology in designing their products. As a result, the consumers began noticing their superior and fascinating products. It is to be noted that the core business of these two companies was technology and so they rode on their forte to replace Oticon in the hearing aid industry. As a result, sales for Oticon dwindled and the management becomes shaky. For a company that had been on top of it game, it was demoralizing to the employees to see their market share deteriorating at an alarming rate. The bargaining power of suppliers also peaked. Initially suppliers had one major client and that was Oticon. When other players came into the market, competition for materials rose and so the suppliers also beefed their negotiating acumen. They had many customers. The scenario further threatened the growth of Oticon. This was a situation where sales are dwindling but the operation costs are rising. Materials’ cost rose as a result of the entry of many players. The prices jumped as competition intensified. Because of the steep operation costs, the company was forced to modify the prices of their products. The action is always referred to as passing operational and production costs to the consumers. The alteration of price made matters worse for Oticon because its competitors could afford to offer lower prices. They option that Oticon could have chosen was to produce cheaper products by reducing quality standards. The ramifications of this strategy would have laid the last nail on the company’s coffin because it would have sent the loyal customers away. Quality could not be compromised but what were their available options? The threats of substitute products were real for Oticon. In the early 80’s, there were many companies offering substitute products. Essentially, it meant that some of Oticons loyal customers left the company. When a consumer is presented with a technological advanced product that supersedes the one he or she is used to, they oblige. Many of these scenarios characterized the late 80’s when the new chief executive was appointed. Once a company loses its loyal customers, a lot of money has to be spent on advertisements to attract more customers to the fold. Now, considering that there are competitors in the field, materials from suppliers are expensive due to their bargaining power, a company without a solid strategy can definitely fall (Wallin, 2013). The last aspect that complicates the market scenario is the power possessed by buyers to bargain. This is a scenario that arises when consumers have many companies to buy from. Initially, the only company in the scene was Oticon. Then came others with equally superior products for the consumers. Using the concept of willing buyer-willing seller, the consumers have the luxury to choose from a range of product and service providers. They have the opportunity and capability to bargain as they want. The burden then turns on the company to appease and satisfy the customers. The strategy involves fresh market penetration and sometimes segmentation to guarantee targeted sales. Oticon was left with no option but to bring in a new leader to change the company’s fortunes. Corporate Strategy It is clear Oticon managers instituted the use of Ansoff matrix in the growth strategy of its company. The matrix talks about managers advance their commercial outfits through the effective use existing or fresh products. This means that Oticon could have introduced new products, which they did with Multifocus product line. They also made better and affordable their services and products to keep loyal consumers. Ansoff matrix also refers to growing companies in new or existing markets. In the case of Oticon, they majorly used the existing market to stamp its authority. They captured the market share in the hearing aid’s market before they ventured into new markets through diversification. Diversification In terms of diversification, Oticon has currently moved in the medical world. Oticon medical focuses on the growth and marketing of bone-anchored hearing resolutions; hearing solutions that are bone-anchored help patients with hearing disorders that can barely be treated with the conventional hearing devices. The losses include the malfunctioning of the inner ear canal and the common disorder of single-sided deafness. The victims of this kind of hearing loss mostly have conductive or mixed hearing loss. There are factors that will enable the company to succeed in this side of business owing to its existing structures. The reputation of Oticon is already established. Many clinics will use these products mostly because the company has been a reliable client. Oticon being a company that has delivered quality before will find it easier to penetrate the market. The company employees who are well absorbed into the Oticon culture are capable of starting the same in the new markets (Oticon, 2009). The same strategy employed by Oticon in growing the hearing aid can be used. Through the use of PESTLE, the aspect of technology can be employed to beat the other competitors in the bone-anchored hearing resolutions. The company can also use Ansoff matrix to grow its business. It will use new products in existing markets. When all these strategies, including the strategy analysis using porter’s five forces, then the success of the company is certainly guaranteed. On the side of corporate social responsibility, Oticon has done a lot but needs to do more. The company needs to be more involved in educating the masses on the possible causes of hearing impairment. When this is done, the world will be left a better place because prevention is better than cure. Corporate social responsibilities are priceless acts that an organization can do without demanding to be paid. However, such initiatives normally help a lot in marketing the companies. The companies therefore do not need to focus on the marketing aspect but rather to the service being offered to the society (Mette Morsing, 2005). Oticon has managed to run an extensive corporate strategy in the social arena. Their services have however still focused on matters dealing with hearing aids. Even in this sector, the company can diversify into doing more so that it can affect the lives of people with different problems. In giving free hearing aids to people, it comes out more as a promotion than act of assistance. The company has nonetheless involved itself in sponsoring surgeries to those with hearing problems. It has also developed huge information bases that address the entire aspect of the hearing disorders. Conclusion Oticon is an international company that has seen both black and bright days. The business strategies that have been employed by Oticon in its recovery and continued growth can be duplicated in other companies. However, the business world is changing at speedy rates and comfort must not be allowed to get into the spirit of the executives. Technological advances and market dynamics are elements that present challenges in the growth of the company. To secure its foothold in other markets, Oticon needs to focus also on the diverse business options that exist. The success it has enjoyed in the hearing aid industry can be replicated elsewhere. The company has massive resources and the world is not just run on profits and sales alone, selfless acts that bring no profit are essential in the long-term health of Oticon. When all these factors are considered, there is no doubt that Oticon can only grow to be more influential and valuable. REFERENCES Bock, S. D., 2011. Critically assess Oticon’s approach to change management. [Online] Available at: http://sdbplus.wordpress.com/2011/12/23/critically-assess-oticons-approach-to-change-management/ [Accessed 2 November 2014]. Mette Morsing, M. S., 2005. Corporate Social Responsibility communication: stakeholder information, response and involvement strategies, Oxford: Blackwell Publishing Ltd. Morgan, D. R., 2011. Revolution at Oticon: The Spaghetti Organisation Condensed, Laussane: International Institute of Management. Oticon, 2009. Oticon Medical to Advance Bone-Anchored Implant Solutions. [Online] Available at: http://www.hearingreview.com/2009/03/oticon-medical-to-advance-bone-anchored-implant-solutions/ [Accessed 2 November 2014]. Shurab, H., 2013. Analysis of the Case Oticon Using the Brain Metaphor. [Online] Available at: http://www.academia.edu/3166007/Analysis_of_the_Case_Oticon_Using_the_Brain_Metaphor [Accessed 2 November 2014]. Wallin, J., 2013. Enabling organizational changes for development of product-service system offers.. Washington, ICED13. Read More