Oticon Business Strategies - Case Study Example

OTICON: BUSINESS STRATEGY Name: Course Instructor’s name Institution Date BUSINESS STRATEGY: OTICON OTICON: BUSINESS STRATEGY Name: Course Instructor’s name Institution Date BUSINESS STRATEGY: OTICON Introduction Oticon, the world’s leading manufacturer and distributor of hearing aids, was started in the year 1904 by Hans Demant. It is located outside Denmark‘s capital, Copenhagen. The company has opened branches in different countries such as a production plant Poland. However, when Hans developed the company in early 1900s he did not have any long-term objectives but was driven by the desire to help his wife whose hearing was impaired. Years later, when Hans passed on his son took over the company. During the Second World War, it became difficult for the company to import auditory aids forcing the company to start manufacturing its own. After the war William made an agreement with Charles Lehman, an American, to set up a firm that could procure machinery for acoustic aid manufacture and dispatch them to Denmark. The company was named the American Danish Oticon Corporation. In the 1970s, Oticon rose to be the world’s leading producer of auditory aids. Oticon is famously known for its spaghetti configuration that was introduced by Lars Kolind in the early 1990s. The spaghetti organization was founded to help revive the company that had lost its market share due to its slow response to development changes in the market environment. The main objective of this strategy was to help the firm overcome the difficult situation and emerge a strong competitor. It was project oriented; it eliminated perpendicular hierarchies, was paper free of a well-coordinated information system. The company, however, partially abandoned the structure in 1996.In the year 2008; Oticon was faced with hard-hitting challenges. These challenges were caused by the global financial crisis and shifting forces in the acoustics industry. This essay assesses how Oticon has successfully recognized its competitive priorities and examines the developments that have taken place the company over the years. The essay focuses on the effect of environmental factors on the company’s operations and the various strategies the company has adopted to overcome challenges posed by such factors as change and recession. It further provides a detailed analysis of the company’s strengths in relation to its competitors and its stand on social responsibility. It does not only evaluate the impact of the company on the society but it also evaluates whether Oticon will be able to sustain is growth in the competitive auditory industry in future (Oticon Through the years) PESTLE Analysis The PESTLE frame scrutinizes the macro environmental forces that affect the company’s operations. These factors are external hence the company has less control over them. Business organizations are, therefore, forced to adjust their operational strategies in order to acclimatize to the macro environmental dynamics. The way the organizations become used to these macro environmental forces does not only determine their strength over their competitors but also their general success. The external forces include technological dynamics, political, social, legal, environmental and economic. The PESTLE assessment is crucial in strategic planning. It also plays a significant role in aligning the company positively with changing forces that impact on the company’s operations. A PESTLE analysis helps the organization to make use of opportunities and frank threats Hayes, (2005). Cameron and Green argue that there are different technological forces that can impact on a business organization (2006). They range from accessibility of resources demand of production to the demand of the products. For instance, after the Second World War Oticon was not able to secure auditory machinery from the United States. This scenario forced the company to establish a firm in the US that could be in charge of purchasing the machinery and shipping them to Denmark. Consequently, change was experienced in the company’s operations (Oticon: Through the Years). In the 1980s, Oticon lost a significant part of its market share. This was due to the company’s traditional organization structure and slow response to change. Oticon was strapping in the analog technology whereas the market and customer preference had moved to digital. The firm could not compete with companies such Sony in terms of technology. The microchips produced by Sony were better than those of Oticon. The change in the demand of the market also affected the company. Oticon produced behind the ear auditory aids while the customers preferred in the ear type. The company, therefore, lost the market share because it had the wrong product. Oticon was not able to compete with strong global companies that had embraced technology such Philips and Siemens. Technological developments in addition to market demand made Oticon to change its business strategies (Oticon: Through the Years). External economic factors have also impacted on the company operations in different ways. In the year 2008, the exchange rates negatively affected the Oticon’s revenues. The 2007-2008 financial crisis affected Oticon in a negative way. To date Oticon still faces technological challenges due the radical changes taking place in the hearing industry. It is, therefore, necessary for the company to adopt business strategy that will enable it gain a competitive advantage in the market (Oticon: Through the Years). Capabilities: SWOT Analysis According to Cameron and Green (2006) SWOT analysis involves assessing a business organization’s strengths, weaknesses, opportunities, and threats. It involves the identification of both the external and internal aspects that are either constructive or unhelpful in achieving business objectives. The analysis concentrates on those factors that are likely to affect business organizations and is less costly. It can benefit an organization in different ways. Through SWOT analysis one can understand their business in a better way, address limitations, daunt threats, exploit the opportunities and capitalize on the strengths. SWOT analysis plays a noteworthy role in development of organization goals in addition to strategies that will enable it to attain the goals. Oticon lost market shares in 1980s due some of its weaknesses. First its product was not appropriate. While other companies and the customer demands had moved to digital, the companies lag behind in analog technology. Even though Oticon was powerful in the Northern Europe and Scandinavian countries, it was weak in Far East and American markets. These weaknesses initiated the adoption of radical transformational change within the organization. Lars analyzed these weaknesses and decided that the company needs radical change in term of it organization culture hence adopted the spaghetti structure (OticonS: Through the Years). Presently, Oticon faces a great challenge of supporting a cost-effective business since it faces a solid competition from global companies such as Starkey and Siemens. Oticon cannot effectively compete with these companies in terms of technology, marketing, financial resources and brand equity. To gain a competitive advantage, Oticon needs to capitalize on its current strength of high cost and high-quality manufacturer. Oticon manufacture high-quality hearing instruments at reduced costs as compared to other hearing manufacturers (Oticon: Through the Years). Oticon has specialized in unique opportunities that are less explored by its competitors to its advantage. For instance, Oticon related diversification in the medical field. This venture will eliminate competition forces since few companies have the technical know how to venture into it. The company explores this area opportunity to gain an advantage over its competitors and become more successful (Oticon: Through the Years). Corporate social responsibility Corporate social responsibility is a type of shared self-commitment that is integrated into a business representation. It works as a self-regulatory means in which a business ensures that it actively complies with the law, standards of ethics and global norms. Firms often go beyond complying with the law and engage in lawful activities that are beyond the company’s interests. The major aim of CSP is to impact positively on the stakeholders as well as the environment. The stakeholders include communities, consumers, investors, and employees. Corporate social responsibility thus covers both the moral and legal responsibility of a business organization. Some suggest that companies that operate within a cps viewpoint gain long-term earnings whereas others blame cps for economic distractions in businesses Cameron and Green (2006). Oticon has a strong commitment to people. It offers great support to hearing care skilled personnel, as well as its clients. The company has mechanisms in place that assist the care professionals to be in a position of motivating those with hearing disability to lead a normal and active life. The organization has thus made a great difference in the lives of people with disability. For instance, the company was recently honored by the county of Arc of Somerset for its outstanding support of the disabled. Oticon that is based in Somerset has worked closely with people with developmental disabilities initiating projects utilizing their unique ability and skills. The company also provides work for the adult training centers based in Arc (Oticon: Through the Years). The Oticon foundation sponsors philanthropic initiatives that are aimed at assisting the organization achieve its goal of empowering those with hearing disability. The objective of this foundation is to empower hearing care professionals that facilitate the company’s goal of provision of sustainable auditory care. This organization is funded by Oticon donations. The foundation engages in helping people with hearing loss secure the required instruments. It serves empowers and advocates for people with hearing loss. It creates public awareness regarding the issues affecting people with hearing loss. The foundation thus seems to sensitize both the medical community and the public at large regarding these issues (Oticon: Through the Years). In the year 2010, Oticon joined other well-wishers in offering support to earthquake victims in Haiti. The Oticon foundation offered to donate a total sum of fifty thousand dollars in order to support assistance services to the victims. The company employees made contributions in support of the disaster victims. Oticon participates in a philanthropic mission that gives hearing care and answers to both adults and children from the most indigent communities in Brazil. The firm carries out screening to determine the needy and fits the hearing aids donated by Oticon. This way the firm contributes toward provision of sustainable care to the disadvantaged. Oticon has participated in this humanitarian mission since 2011. It also sponsored a South African mission in the same year. This company is good positioned in terms of social responsibility as it puts people’s needs first. It supports a variety of humanitarian and philanthropic missions worldwide. This portrays it as being sensitive and mindful of people’s lives in addition to its money making venture. The Oticon foundation has touched people’s lives in various ways. Oticon social responsibility has facilitated its competitive advantage. Strategic choices Business strategy can be defined as the way through which an organization achieves it goals. Strategies deal with issues regarding resources, for instance, secure finances to start up a new company. The strategies are also concerned with the span of business activities. Business strategy foster goal achievement through resource configuration in dynamic environment in order to achieve user’s needs and accomplish the stakeholder’s satisfaction. Depending on the level of change experienced, an organization can adopt a number of strategies (Hayes, 2005). Spaghetti organization culture Oticon is of much interest to many scholars because of its remarkable reaction to change that was initiated by Lars Kolind, who changed the Oticon organization. The PESTLE technology aspect influenced the strategy in a big way. In 1990s, that world was experiencing radical changes in different aspects. As an excellent director, Lars realized the dynamics of technology and used the realization to the firm’s benefit. This is, therefore, a practical example of how managing executives can use that PESTLE to direct their business strategy. He understood change was taking place and saw that need of a knowledgeable company that would explore a new penetrate in terms of user contentment. Kolind also realized that there was little they could perform better than their competitors and decide to change the organization culture. The Oticon spaghetti structure was implemented in 1991 (Oticon: Through the Years). The spaghetti structure supported and developed the workers by reducing communication barriers. Information was made available to all employees through an elaborate communication system. Employee development was maximized by getting rid of job titles, as well as descriptions. Employee could organize themselves into groups and select a mentor to see them through a certain project. Only executive corporate had departments. The spaghetti strategy supported sharing of knowledge thus facilitating innovative ideas. Employees were set free to decide on their working hours and vacation. The strategy placed Oticon ahead of its competitors. The spaghetti structure enabled the company to produce high technology products thus was able to outdo its competitors. The short term objective of the structure was cost reduction while its long-term aim was to build a knowledge organization. However, the spaghetti structure was abandoned in 1996. The spaghetti organization led to impressive financial gains in the company. Conversely, the long-term effects of the changes are even more impressive. The changes formed an organizational framework that continually revitalizes itself. All that the employees need is to be set free and utilized their multi-disciplinary skills which are already solidly rooted in them. Today, Oticon is a continually changing organization. In opposition, the spaghetti organization had its limitations that eventually led to its abandonment in 1996. It led to conflicts since it favored career-oriented workers who do not need commanding powers. Concentration on numerous project caused inefficiency as well as confusion as the workers concentrated on new ideas and projects abandoning the existing projects. The concept of teamwork proved effective in Western countries but seemed inapplicable in Eastern countries. The spaghetti organization was thus abandoned. In Porter (2008), strategies depict how a firm explores its competitive gain across its preferred market scale. Porter outlines three generic strategies as focus, lower cost and differentiated (2008, 86). A firm selects either lesser costs than its competitor or distinguishes itself alongside dimensions cherished by its end users to dominate higher product prices. A firm can also decide to focus by offering its products to chosen market segments or across numerous market segments. The five strategies of Porter became applicable because the firm that was near collapse was influenced by superior technology made by companies like Sony Ericson. Sony Ericson dared Oticon to manufacture high technology products. Kolind made note of this industry competition and fashioned comparable products of towering technology (Oticon: Through the Years, 2009). Corporate strategy The corporate strategy involves a strong dedication to acoustics caregivers worldwide. Oticon is commitment in provision of the support needed by these professionals to make people whose hearing is impaired strong and motivate them to lead a normal life. The main objective of the corporate strategy is to assist the company as well as the auditory professional caregivers to meet the hopes of the aging cohort (Corporate culture in William Demant) Oticon’s operations and activities are designed in such a way that they put people’s needs first. This core philosophy will remain the same in future. The company will interpret this philosophy in the light of altered user demands in future (Corporate culture in William Demant). The modern generation has a changed perspective about age Mullins (2005, 23). Mullins further asserts that today’s aging population is more knowledgeable and challenging than before. This generation is most health sensitive that has ever existed and associates this with auditory care as well. Assisting this generation with hearing is not satisfactory. Oticon is determined to make them powerful, frank communication barriers among them so that they can interrelate naturally and take part in an active manner. There is constant change in the population that requires hearing aids. The sense of balance between today’s and tomorrow’s users is at a tilting point. It is very significant that Oticon creates auditory solutions that are largely flexible. The sustainable tools created by the company should be designed to make people besides motivating them to lead an active life. This broad approach by Oticon will merge technological management with fresh services and innovative business support schemes founded on user insights (Corporate culture in William Demant). . The fresh corporate strategy is articulated in a brand mold which is developed on a powerful obligation: our starting point is people, our means is innovation and our collective goal is to empower people. This model presents four core areas where Oticon’s knowledge, passion, and commitment merge to give support to auditory care specialists. Oticon’s effort concentration, resources, and investments will take place in these hub areas in the future (Corporate culture in William Demant). . Oticon constantly communicates with the end users of its products. It pays close attention to the challenges they encounter at a personal level as well as a professional level. The company works with its clients and auditory care specialists in the field, laboratory and its center of research. This close interaction of the company with different parties has resulted in fresh innovations about the user’s requirements, hopes and communication in life (Corporate culture in William Demant). . Oticon strongly believes that innovation arises when people work as a team to discover the needs of the end user. Ground-breaking auditory care answers are produced when the insights of the user influence technology and audiology. Oticon provides an extensive range of both online and offline tools in order to facilitate effective communication between the clients and the caregivers. In future, the overture of fresh will depend on a more vigorous and challenging cohort of users. The organization’s most powerful and valued obligation is to empower people. Oticon’s goal is to make people powerful so that they can play a role that is active in life. This goal is shared with the hearing experts in the world (Corporate culture in William Demant). . Diversification strategy According to Mullins (2005, 45) business diversification strategies can either be related or unrelated. Related diversification takes place when a company shifts into another industry that corresponds to the industry in which the firm exists. Firms may slot in related diversification so s to make use of the core competency and become more successful. In unrelated diversification, a firm affixes fresh product lines and infiltrates new markets. Oticon related diversification strategy involves introduction of Oticon medical in 2009 medical that introduced a unique product-bone anchored hearing solution. This market product was a new area that the company considered as a long term initiative. The company CEO Niels Jacobsen asserted that the organization will continuously allocate its resources to the expansion of exclusively new areas. Very few hearing manufacturers had the technical now how to act on this product development (Oticon: Through the Years) Conclusion In conclusion, Cameron and Green contend that, the international business market is rapidly on the rise and fast changing at the same time (2006, 56). In this kind of business scenario, the species that reacts rapidly to change is likely to survive and not the most intellectual or the mighty. Considering the business environment, business organizations need to continually redesign their thoughts in order for them to continue to exist. Transformation of organizations could be more effective in comparison to restructuring Cameron (2006, 59). Taking into account the different developmental changes that have taken place in Oticon over the years, I can bring to a close that the company has the potentiality to face the challenges prevailing in the 21st century as well. Lars Kolind was the approved manager for the company in the 20th century. He remarkably succeeded in reviving the company that was almost on the threshold of collapse (Oticon: Through the Years) .This serves as a lesson to the company and the public at large that the nothing is impossible. All Oticon needs is to stay responsive of the market demands and react more rapidly and better than its rival competitors. References Cameron, and Green M.(2006) Making sense of change management. Kogan Page Corporate culture in William Demant retrieved from http://.www. Sennheisercommunications.com on 23 November 2014. Hayes, J.(2007 )The Theory and Management of Practice Change. 2nd ed. Basingstoke, UK: Palgrave Macmillan. Mullins, L.(2005)Management and Organizational Behavior. 7th ed. UK: Pearson Educated Limited. Oticon: Through the Years. Retrieved from http://.www.sennheisercommunications.com on 24 November 2014. Porter, M.(2008) ‘The Five Forces that Shape Strategy’ .Harvard Business Review January 2008.S References Cameron, and Green M.(2006) Making sense of change management. Kogan Page Corporate culture in William Demant retrieved from http://.www. Sennheisercommunications.com on 23 November 2014. Hayes, J.(2007 )The Theory and Management of Practice Change. 2nd ed. Basingstoke, UK: Palgrave Macmillan. Mullins, L.(2005)Management and Organizational Behavior. 7th ed. UK: Pearson Educated Limited. Oticon: Through the Years. Retrieved from http://.www.sennheisercommunications.com on 24 November 2014. Porter, M.(2008) ‘The Five Forces that Shape Strategy’ .Harvard Business Review January 2008. Read More