Oticon Business Strategy - Case Study Example

BUSINESS STRATEGY Name: Course: Tutor: University: City and State: Date: Business Strategy Introduction Strategic or business management is the systematic analysis of the factors related with the organization itself (internal factors) and competitors and customers (the external environment) to provide the basis for upholding optimal management practices. It is the process of postulating the plans, objectives, programs, missions, visions and projects of an organization designed to help achieve the objectives and allocating resources to implement the plans, programs and policies. Business management strives to integrate and coordinate the actions of the several functional areas of an organization in order to accomplish long-term organizational goals. There are four key aspects of strategic management. They are strategy formulation, implementation, evaluation and environmental scanning. No matter how large or small the organization is, following these elements leads to a consistent, focused and aligned approach to ensuring objectives and goals are met. Businesses require a planning model that allows them to anticipate the future and use it to analyze the organization in terms of its culture, strengths and weaknesses and mission. With strategic planning, firms are able to mark their transition from operational planning to choose a strong strategy direction for the organization. Each organization way of handling internal and external context is unique as each reflects a distinct environment, culture, management style, structure, resources among other features. Every manager wants their organization to succeed. This can however be achieved through acquiring the right support and resources that the organization needs to fulfill its mission. This essay will analyze the success of the Oticon (the Danish hearing aids aid technology) and how it strategically identified its competitive priorities. It will also evaluate the developments which took place at Oticon. Oticon Oticon is one of the world`s largest hearing aid manufacturer. The company was founded in 1904 by Hans Demant following his wife`s hearing impairment. It seeks to promote sustainable improvements in access to hearing care for people with hearing problems around the world. Over the years, the company has been able to receive humanitarian support from professionals within the community of operation(Lynch, R. 2006, 43). The Oticon mission is to empower people with hearing losses with its main goal being to empower a community of caring among qualified hearing care professionals that help in providing access to manageable hearing care for communities and people in need. Oticon seeks to educate the public on issues facing individuals with hearing losses thus increasing the understanding and awareness of hearing loss and the effect it has on quality of life. All companies go through challenges in their lifecycle and Oticon is not an exception(Warren, K. 2008, 35). In the 1980`s the company lost some of their market shares and that marked the beginning of their struggle. To mitigate this problem, they appointed a new CEO Lars Kolind who redesigned the organizational structure and substituted the conservative hierarchical structure to an innovative structure which he called the “Spaghetti organization”. To bring back the company, Kolind ensured that he approved every expenditure. He also restructured Oticon head offices in Denmark. Kolind main goal was to change Oticon from an industrial organization creating high quality services to a first rank organization with a physical product. All he needed was to create an innovative, learning, predictable and a flexible strategy to achieve that. Since then, the company has been able to stay on the top of the world’s market in producing hearing aids in the world. Through strategic planning and management, the company received a worldwide acknowledgment and became a model for the decentralized organizations(Warren, K. 2008, 25). Oticon has been able to stay ahead of their competitors as it has its own production facilities and basic research department, and has placed itself to be the ideal partner for prominent hearing support clinics around the world. The company continues to stress on the quality of their hearing aids by depending on their product and engineering design. How Oticon identified its competitive priorities. Oticon had to undergo four organizational changes which helped to identify its competitive priorities. The changes helped to minimize the expenditures and to create an innovative and a more flexible organization. First, it had to eliminate all traditional departments. The head office in Denmark was changed to one large department and all activities were systematized as projects in order to identify their temporary nature (Lynch, R. L., 2006,47). Changing from traditional departments was advantageous in that it discouraged the smaller departments from considering their personal interests instead of the company`s. It also discouraged managers from fighting for the authorityof their department rather than working for the benefit of the firm. Eliminating the departments also created more flexibility in responding to unexpected work demands. Secondly, the organization work had to be arranged in project form (Warren, K. 2008, 29). To work through the project, a project leader had to be chosen by the group of workers and the top management. The project leader`s job was to advertise the projects on their work station or on an electronic bulletin board whereby employees signed up for whatever projects they felt wassuitable for them. This enabled an effective and easy allocation of resources to all employees working on various projects. This change helped in improving Oticon response to the demands of the customers. Thirdly, employees had to occupy several positions. They had to work on several tasks requiring different skills at the same time. This provided an opportunity for the employees to use their own skills in more satisfying ways than if they were handling one job. This also enabled employees to develop skills in different area of their interest. Employees in the financing and production department were also able to subsidize in an inventive way to the manufacture of marketing materials. This also aided workers with different perspectives and backgrounds to bring diversity of ideas in a natural manner(Lynch, R. 2006, 49). Lastly, the company had to introduce a new control philosophy which continues to exist even today. Oticon`s top management continues to hold the believe that employees who have decided to work on a particular project will show interest in their work than if they had tasks assigned to them. This shows that they will be more responsible for their work and will have the motive to do it effectively. Project leaders no longer need to act as monitors but as motivators andinnovators since workers are more responsible for their own work. Oticon under the leadership of Lars Kolind went through major developments.As an approach to help the company drift over the problematicsituation and strive against competitors, Kolind premeditated and introduced a revolutionary effort in management style and organization structure. The Oticon spaghetti organization was characterized by physical barriers, alack of vertical hierarchies and a project-focus, a paperless office setting where information was easilyaccessible for all and a networked information system. Strategic position Environment–PESTEL Kolind knew that the world was changing and that there wasan urge to introduceknowledge based company, which would make a modification in the form of aninnovation in customer satisfaction with hearing aids. This modified his strategy as he identified how a much greater technology would change the company and facilitated for this in his spaghetti structure to make Oticon a more flexible organization with the employees being able to brainstorm and come up with much more innovative ideas. Porter`s five forces come into play as Oticon`s deterioration in the 1980s was challenged by the innovative technologies being made by companies like Sony Ericson who competed with the company in the beginning to make products of higher technology. As an effective leader, Kolind identified the technology rivalry and solved the issue by introducing their own similar products but of higher technology(Koumparoulis, D. 2013, 33). Kolind was prepared for the unpredictable circumstances that characterized the business environment in different ways. Implementing and recognizing the strategies and ways in which the organization could adjust and deal with them was his first priority as it would give the company an advantage to strive within the industry. The political environment was not ahindrance for the performance of the company. Managers and employees were aware of the political interferences and therefore had to come up with appropriate solutions to overcome them completely(Koumparoulis, D. 2013,36). The economic environment of the company on the other hand was a not easy gate away for the company had to deal with new entrants in the markets who were giving them a strong competition. The rising market prices also challenged them as they found it challenging to keep with the high interest rates, foreign exchange rates and inflation rates. This greatly affected the supply and demand cycle thus resulted to major business environment. Kolind was however able to mitigate this problem by ensuring that he kept a record of the company`s expenditures to minimize cost(Koumparoulis, D. 2013, 38). Social factors in Oticon case had to do with the mindset of the people of the countries where the company had headquarters. People still held to the fact that Oticon was the world`s best hearing aid company and its products were unique and effective.Oticon CEO was aware of the demographics, consumer attitudes and opinions, lifestyle changes of the people, the views of the media, buying access, brand preferences, the working attitude of the people, ethical issues, the buying access and shifts in people`s population(Koumparoulis, D.2013, 39). The company did not face legal challenges as they were comprehensive with the law. They knew what the law required them to do. They were aware of future legislation, competitive regulation, and the processes of regulatory bodies, employment law, environmental regulations and consumer protection laws. Oticon knew how to select a good geographical location to set their companies (Environmental factors)(Koumparoulis, D. 2013,41). They had to familiarize with environmental issues both national and international of the particular country, know the market and customer values and familiarize with the environmental regulations. SWOT analysis Strengths One of the key forces was to make Lar Kolind the CEO of Oticon. The company was developing in a rising economy which is a positive approach to achieve goals. Kolind had visualizations for the company, which were innovative by introducing new revolutionary values. That is, its motive to be and also to setup the technology to facilitate the change. The positive motive of their CEO enabled them to stay ahead of their competitors and secure clients all over the world (Sull, D. 2005, 186).The other strength was the presence of a consistence strategy and vision and the means by which it had been put in place. This ensured that the workforce was involved in major decision making processes in the company. Konlid was able to explain to them the meaning of change and rationale in the organization(Erhard, K. 2004,91). The positive attribute of the company workforce gave it a competitive advantage over others. The employees had good credentials, reputation, skills, network and knowledge which helped Oticon to stay ahead in terms of growth and development. The company also had tangible assets such as credit, capital, distribution channels, technology and existing customers enhanced them to keep pace with the audiology markets. They also depended on their strong development and research capabilities to produce quality goods and services, which enhanced consumer satisfaction. Oticon directed it attention to the importance of every aspect of organizational life. This can be seen in the case where the company focused on every detailed aspect that made the workflow of the firm comprehensible through the rules, structures, hierarchies and routines which were crucial for their day-day activities. Weaknesses There were some repelling forces, which were pulling the company behind. After Kolind analyzed the general performance of the organization, he realized that there was no better strategy that could be adopted to do better than the competition (Erhard, K. 2004,93). The company had dropped original skills and proficiencies to the new structure and so the original culture had to change. Opposing change was also a negative factor as the company had to fight against individuals losing part of their influence as the organization was shifting from a technology to a knowledge based company.The management department needed improvement to help accomplish objectives and compete with their strongest competitor, which took time to accomplish. Opportunities Adapting new technology in the company led to a significant change in the company. It was able to make more profits than it had done before. The company also sought for change in customer demographics and customer lifestyle as they were looking for new suppliers and people to collaborate with in their business (Erhard, K. 2004, 97).It was also able to focus on the two types of projects; hearing aid construction and technology development projects. There was also a noticeable relationship between the buyer and supplier’s relationship which presented new opportunities for the firm. Another opportunity was that Oticon provided sufficient training to their workforce unlike in other companies which did not offer training. It was also clear that the target market needed more service, which its competitors were less likely than ever to provide. Threats The main threats faced by Oticon were fear of being detachedwith the market’s needs, technology changes, slow market growth, more radical competitors leading to the threat of being out of the market and unbalanced global positioning (Erhard, K. 2004, 104). Oticon had to make a decision and outline what would support the change initiative. The larger price oriented stores also advertised low product prices in newspapers, which gave them a competitive advantage as customers thought they were not given good value. Conclusions The SWOT analysis shows that, based on financial terms, market shares or the sustainability of the solution, there was no doubt that Kolind was focused on the turnaround of the company. He was able to communicate the visions and strategies clearly. He ensured that they were both implemented efficiently and effectively to drive change and overcome resistance that could have undermined the achievement of objectives. Purpose Oticon believes in the philosophy that it takes more than technology to create the best solutions for problems. This is the main reason why the company puts the interests and individual needs of the peoplewith hearing problems. Whether its technology, audiology, or consumers, the philosophy of the company remains the same “Putting people first”. Their mission enables them to work across the globe to assure hearing solutions provide the highest possible satisfaction by developing effective and innovative solution and building partnership with other companies(Sull, D. 2005, 183). Oticon has helped individuals with hearing impairment in the society as it reverberate in the designs of their products, customer services and comprehensive research processes that strive to make technologies that put their clients at the center. The company has also motivated other emerging hearing aid companies. They do not view it as a successful large company but an organization that does not put its fate into the hands of professional directors but trusts the whole foundation, which has more compassionate aims(Sull, D. 2005, 156). Strategic choices Business strategy Bearing in mind the competitive forces models, which are bargaining power of dealers, threat of substitute products and services, threat of new market entrants,and bargaining power of consumers, Porter upholds that only three strategies are accessible to organizations: cost leadership, product differentiation, specialization by focus and leadership(Warren, K. 2008,33). Kolind established his vision of product diversity by establishing a concept of the organization’s future, recognizing its mission and articulating a clear account of anticipated outcomes. He changed the mission of the company to be to help people with hearing impairment to live the lives they wished for with the hearing they had(Lynch, R. 2006, 52). Oticon CEO was able to identify their competitive rivalry of the company. He established a cost leadership strategy which was suitable for the firm as it helped in competing with the prices in the markets. He analyzed the strategy and saw that it was not the most effective approach to use since competitors were setting intense price pressures and this would have ended up reducing their prices drastically(Warren, K. 2008,35). He then considered differentiation which was a viable strategy to help maintain their loyal customers. This also made it easier for them to cope with the hearing needs of their customers who were part of the niche market strategy(Sull, D. 2005, 184). The company also employed the three Porter`s strategies which were essential in creating barriers for new entrants. They ensured that they changed the strategies of the company whenever they needed to achieve different goals. As a mature company, they could lower prices without compromising its profits and this made it impossible for new entrants to contend on prices. The focus strategy also enabled them to become a niche player simply because of their core competence. Oticon was able to develop a thorough understanding of their customers’ demands which was a difficult task for new entrants (Sull, D. 2005, 184). Oticon had what is referred to as the supplier power. Suppliers were able to exercise their power in the case of niche or differentiation strategies. Kolind made use of these strategies to enable the company to pass the price increase of their suppliers to their final consumers through the premium pricing strategy. On the other hand, maintaining the buyer’s power was easy for them. As the cost leaders, they were competent to offer lower prices to powerful and large buyers (Lynch, R. 2006, 54). Kolind also focused on the differentiation and the strategy to weaken the threats of substitutes. The unique nature of their product enabled them to attract and maintain clients all over the world as customers had no other substitute product in mind. Corporate strategy Ansoff axes. Ansoff is a strategic marketing tool that links an organization corporate strategy with its general strategic direction. It presents four growth strategies, market development, market strategies, product development and diversification.As many hearing aid companies continue to emerge in today`s dynamic environment, Oticon is faced by the challenge of dealing with its competitors. To enhance market development, the company continues to use the Eriksholm Research Centre to gain an edge on the market. It is the biggest research Centre in the world and is located in Denmark. The center has been of great advantage as Oticon continues to produce the best ear- hearing devices. The main goal of the research Centre is not only to develop new hearing instrument technology but also to work with people using their hearing instruments in real world situations so that they can apprehend their needs, social life and expectations. On the growth strategies of the company, Oticon launched the Epoq high technology wireless device with a sleek design and binaural capability. They are recognized as one of the prominent manufacturers of diagnostic equipment worldwide. The company today owns a variety of equipment for all needs, tastes and lifestyles(Lynch, R. 2006, 55). Oticon launched a new hearing aid known as Nera which is discreet and lightweight and relies on intelligent designs that protects people with hearing problems from uncomfortable noises like whistling. They have also developed another new model called Ultra which they consider to be of advanced technology and is able to adopt to each person`s sound environment. Oticon also focuses on developing their products to help stay effective and keep with the pace of the changing technology in today’s world. The company has succeeded in making recognized hearing aid devices like the Oticon Agil hearing aid which uses the second wireless generation features and industry leading digital signal processing, Oticon Alta hearing aids which provides customers with directionality, connectivity and speech clarity, Oticon Intiga hearing aids which is a tiny high-performance hearing device with high speed sound processing chip and a wireless technology that work together to select and organize voices and sounds that people with hearing problem hear(Lynch, R. 2006,52). Other wireless devices include, Oticon Acto Hearing Aids, Otcon ConnectLine, Oticon Chili Hearing Aids, Oticon Epoq Hearing Aids with Bluetooth, Oticon Safari Hearing aids among other digitalized hearing devices. Strategies of challenges posed by changing dynamics Oticon needs an effective strategy to follow to overcome the challenges posed by changing dynamics in the hearing aid industry and the global financial crisis. The company needs to understand that both execution and planning are interdependent. Formulation and implementation of a strategy a two distinct processes, this suggests that the overlap between planners and those who execute the plans increases the chances of executing success. Oticon should therefore involve those responsible for execution in the planning process to avoid threatening the knowledge transfer and the overall implementation process(Warren, K. 2008, 92). They should also understand that managing change is not easy and an effective strategy should be implemented to achieve this. Execution entails change in incentives, structure, people, responsibilities and controls(Warren, K. 2008, 35). More hearing aid products are being consumed more outside the country of production as globalization brings about greater convergence in term of consumer preferences and tastes. To stay competitive, the hearing aid company should embrace offshore outsourcing since many countries have low labor costs, technological advantages and high levels of educational workforce. Oticon should also understand the cultural and ethnic diversities of different people as some possess distinct norms, attitudes and value as they tend to pose a barrier to product growth. This should be achieved by increasing cultural diversity in both private and public sectors to help draw the attention on the difference between cultural and ethnic groups in their attitudes towards their products. Diversification Oticon related unrelated diversification strategies would be used to expand its operations by introducing new markets, products and services or production stages to the company. Diversification is important as it will allow the company to enter lines that are different from the existing operations(Lynch, R. 2006,57).However, considering the fact that Oticon has ventured in the production of hearing aid devices since the beginning and has been able to succeed over the years, moving to unrelated diversification will not be a good strategy as this will shift the focus of the company management into another activity which can cause divided attention. The company is bound to incur losses if it considers the strategy as this would require addition of new markets, products and service which are not related to hearing-aid facilities. Oticon`s future assessment Oticon has and will always continue to lead the hearing industry as it has already established future goals and objectives. Although the business world is changing drastically with emerging companies offering similar products and services, the company is determined to offer unique similar products so as to maintain their position. Inspired by continued research, the present challenges facing the organization will be easily mitigated as solutions will be discovered to new levels that will help in empowering their clients to achieve their wish for socially active life. Oticon has a set individualized approach to help mitigate future problems. They are aware that consumers have varied demands on their hearing throughout their life cycle and that audiology is no longer a set of diagnostic tests but an area that involves a wide range of activities and requires understanding of other disciplines such as engineering, computer science and psychology(Sull, D. 2005, 32). With this knowledge, hiring people with knowledge and skills related to the field of audiology will be easy for them. Professionals working in the company are not only comprehensive with the how hearing works and the impacts of hearing loss but also the stresses placed on hearing when hearing damage is present. With attitudes like this, Oticon will continue to penetrate in the competitive scenario in the hearing aid industry(Warren, K. 2008, 35). The company will continue to sustain its growth and continue to excel simply because they hire people who understand the role of encouragement and motivation to the people with hearing impairment. These professionals are conversant with the capabilities of the hearing devices, their physical properties and how to control and programme various hearing solutions as well as the suitable treatment for the patients. When Oticon CEO- Lars Kolind stepped down in 1998, he left a strong competitive situation in the company. And notwithstanding the move to new premises and inevitable change, the company has continued to remain loyal to the principle and values that he put in place. The company continues to centralize the hearing-aid industry with double-digit growth and prominentindustry returns. Conclusion Organizations cannot operate without a strategy. A strategic management is important to the expansion and development of all organizations as it sets forth the vision and a mission with operations. It describes where a company wants to go and not necessarily how they are going to get there.Visualizing goals and then outlining strategies to hold in order to attain the objectives is the true principle of strategic planning. Easy to oversee in a smaller business, strategic thinking identifies the methods one will take to reach your goals. For example, if one believes that they must expand their electronic commerce function to attain augmented sales volume, he or she also identifies the method to use their strategy and arrive at the company goals. Solutions for strategic problems should be sought immediately to avoid the downfall of an organization. Problems like poor annual company performance reviews, lack of discussion around career development, poor decision- making, shifting strategic priorities and the failure to find the perfect project that suits the talent of the people must all be solved strategically to ensure that the organization operates effectively. References Erhard, K., 2004. SWOT Analysis: Use of Defensive/Offensive Evaluation Instead. The Journal of Applied Business Research, 21 (2), Pp.91-105 Koumparoulis,D., 2013. PESTEL Analysis: The case of E-shop. International Journal of Economy, Management and Social Sciences,2(2)Pp. 31-46. Lynch, R. L., 2006. Corporate strategy. Harlow, England: Prentice Hall. Sull, D. N., 2005. Why good companies go bad and how great managers remake them. Boston: Harvard Business School Press. Warren, K., 2008. Strategic management dynamics. Chichester :Wiley & Sons. Read More