CARLSBERG IN EMERGING MARKETS

A breeze of optimism blew through the office of Carlsberg A/Ss CEO, Jrgen Buhl Rasmussen. After
finally gaining 100 per cent control over the giant Russian brewery Baltic Beverages Holding (BBH), and
with the investments in Western China beginning to bear fruit, the newly appointed CEO was confident
that the Danish brewing companys intensified focus on emerging markets would pay off. The company
was counting on tapping the massive potential in emerging markets in order to achieve a much-needed
reduction in its dependency on the maturing and stagnating Western European beer markets, which
accounted for a full 61 per cent of the companys revenue in 2007.
Indeed, Carlsbergs emerging market efforts had come a long way. In the Russian market, which was
considered to be one of the fastest-growing beer markets in the world, Carlsberg enjoyed market-leader
status through its ownership of BBH. In that market, it had a sales volume of approximately 23 million
hectoliters of beer in 2007 and revenue of kr 9 billion (US$1.8 billion). As for the highly promising
Chinese market, which was regarded as the worlds largest beer market in terms of population and size,
the Danish company had achieved a 55 per cent market share in the western parts of the country, and it
operated 20 brewery plants in China with close to 5,000 employees. In fact, as Carlsberg recognized that
the European markets would eventually reach a point of saturation, the aim of the Chinese investments
was to create a platform for future growth and revenue.
The outlook for Carlsberg had not always been as bright as it appeared by 2008. Carlsbergs emerging
market strategy had taken a long and winding road. For instance, Carlsbergs acquisition of the BBH
shares was the result of a troubled and expensive partnership with Norwegian Orkla ASA. In addition,
before Carlsberg had become successful in the western provinces of China, the company had spent
plenty of valuable time and resources trying to enter the rich provinces of southeastern China, a
strategy that had failed. Furthermore, in the early 2000s, Carlsberg was on the brink of being reduced to
a secondary player in the global beer market as the consolidation of the industry proceeded,
Carlsberg A/S became an obvious takeover target and was also at risk of being cornered as a small
regional player. Nonetheless, in 2008 as the first decade of the millennium neared an end, Carlsberg was
the fifth-largest brewery in the world in terms of volume produced. Much of this reversal of fortune
could be attributed to the companys emerging market focus.
Despite Buhl Rasmussens optimism about the future, the real question was how Carlsberg A/S could
successfully continue to capitalize on its growing engagement in emerging markets. We dont know
how large the Chinese market will be in five years, and I dont know if China can become a new BBH,
the CEO explained, but it is definitely not impossible, as the market is enormous.1 It was no surprise
that competition was becoming increasingly fierce in this booming emerging market, and history had
clearly proven that doing business successfully in this market required unconventional approaches.

Business.dk, August 18, 2008.

LEGO GROUP: AN OUTSOURCING JOURNEY

The last five years rather adventurous journey had taught the fifth-largest toy-maker in the world the
LEGO Group the importance of managing the global supply chain effectively. In order to survive the
largest internal financial crisis in the companys roughly 70 years of existence, resulting in a deficit of
DKK1.8 billion in 2004, the management had, among many initiatives, decided to offshore and outsource
a major chunk of LEGOs production to Flextronics, a large Singaporean electronics manufacturing
services (EMS) provider. In this pursuit of rapid cost-cutting sourcing advantages, the LEGO Group
planned to license out as much as 80 per cent of its production, besides closing down major parts of the
production in high-cost countries. Confident with the prospects of the new partnership, the company
signed a long-term contract with Flextronics. It has been important for us to find the right partner,
argued Niels Duedahl, a LEGO vice-president, when announcing the outsourcing collaboration, and
Flextronics is a very professional player in the market with industry-leading plastics capabilities, the right
capacity and resources in terms of molding, assembly, packaging and distribution. We know this from
looking at the work Flextronics does for other global companies.2
This decision would eventually prove to have been too hasty, however. Merely three years after the
contracts were signed, LEGO management announced that it would phase out the entire sourcing
collaboration with Flextronics. In July 2008, the executive vice-president for the global supply chain, Iqbal
Padda, proclaimed in an official press release that we have had an intensive and very valuable
cooperation with Flextronics on the relocation of major parts of our production. As expected this
transition has been complicated, but throughout the process we have maintained our high quality level.
Jointly we have now come to the conclusion that it is more optimal for the LEGO Group to manage the
global manufacturing set up ourselves. With this decision the LEGO supply chain will be developed faster
through going for the best, leanest and highest quality solution at all times.3
This sudden change in its sourcing strategy posed LEGO management with a number of caveats. Despite
the bright forecasts, the collaboration did not fulfill the initial expectations, and the company needed to
understand why this had happened. Secondly, what could LEGO management have done differently?
Arguably, with little prior experience in outsourcing this large amount of production, the LEGO Group had
had a limited knowledge base to draw on to manage a collaboration like this. Yet, with Flextronicss size
and experience with original equipment manufacturers (OEMs), this, in theory, should not have been a
problem. Lastly, one could ponder whether the unsuccessful collaboration with Flextronics had been a
necessary evil for the LEGO Group. LEGO managements ability to handle its global production network
after the Flextronics collaboration had surely changed, and aspects like standardization and
documentation had to a much larger extent become valued.

2
3

LEGO press release, December 21, 2005.

LEGO press release, June 1, 2008.

BESTSELLER FACING A NEW COMPETITIVE LANDSCAPE IN

CHINA4
In the fall of 1996, Bestseller became one of the first international fashion companies to enter the
Chinese retail market.5 Earlier that year, two good friends, Allan Warburg and Dan Friis, had made contact
with the CEO of Bestseller A/S, Troels Holch Povlsen, regarding the prospect of selling Bestseller brands in
China, where they felt there were many business opportunities.6 Holch Povlsen found himself believing in
the two entrepreneurs and was convinced by their enthusiasm for the Chinese market. At the same time,
he was in need of some help with Bestsellers purchasing offices in Hong Kong and Beijing.7 The plans
materialized in the joint formation of Bestseller Fashion Group China Ltd. (Bestseller China), and the first
outlet for the ONLY brand was quickly established in a department store in Beijing.8
Warburg and Friis soon proved that they had been right about China. Within the first year, Bestseller
China opened 24 stores in nine different cities, and it introduced two other brands from Bestseller A/Ss
portfolio, Jack & Jones and Vero Moda, at the beginning of the new millennium.9 A little more than a
decade after the first store opened, Bestseller China had almost 2,000 stores and accounted for more
than one-third of the total turnover of Bestseller A/S.10 The secret to Bestseller Chinas extraordinary
success was its ability to sell price-competitive European designs with a Chinese touch, which was
achieved by locating all production in China and modifying Bestseller A/Ss designs to suit the size and
tastes of Chinese middle-class consumers.11
With a ten-year head start over potential competitors, Bestseller China had by the end of 2007 managed
to establish a strong presence in China. However, the high economic growth and growing middle class
were making the Chinese market highly attractive for other companies a fact that Troels Holch
Povlsen was very aware of: There is a growing and reasonable market in China for many different
consumer goods, but that also means that the competition is increasing, he said.12 However, although
global giants such as Zara and H&M were devoting big chunks of their budgets to entering China and
capturing market share, these aggressive new entrants were not Holch Povlsens biggest concern.13 As
he saw it, The competition that we see is not coming from American or European players, but from
local companies and in the future, we will not only see Chinese goods, but also Chinese companies on
an international level that is certain.14

This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives
presented in this case are not necessarily those of Bestseller A/S or any of its employees.
5
Dansk modetj bestseller i Kina, Brsen, 1998.
6
Kinesere gr i dansk tj, Jyllands-Posten, 2004.
7
J. Brink, M. Stiller and J. Trnblom, China success a gateway to global success? A case study of how to create a
foreign home market, Stockholm University, 2005, p. 46.
8
Bestseller bner egne butikker i Kina, Brsen, 1997.
9
Dansk modetj bestseller i Kina, Brsen, 1998; Kinesere gr i dansk tj, Jyllands-Posten, 2004.
10
Nyt rekord-resultat fra Bestseller, Brsen, 2005; Kinesiske forbrugere er med fremme, Berlingske Tidende, 2007.
11
Kinesere gr i dansk tj, Jyllands-Posten, 2004.
12
Kinesiske forbrugere er med fremme, Berlingske Tidende, 2007.
13
H&M vil slge tj til kineserne, Brsen, 2006; Bestseller rival er ren pengemaskine, Brsen, 2007.
14
Kinesiske forbrugere er med fremme, Berlingske Tidende, 2007.

NOKIA: FROM IN-HOUSE TO JOINT-R&D

For the management of Nokia Denmark, the question of defining the future strategic directions for its
product development activities was a vital issue that boiled down to some key concerns. Nokia Denmark
was a subsidiary of the worlds largest telephone manufacturer, the Nokia Corporation, and was one of
the largest of Nokias many product development units dispersed all around the world. The Danish site
developed somewhere between six and ten mobile phones per year, depending on instructions from the
Nokia headquarters located outside the Finnish capital of Helsinki.
In 2007, Nokia Denmark decided to deepen its relationship with one of its current suppliers, Taiwanesebased Foxconnthe worlds largest electronics component manufacturer with most of its facilities in
mainland Chinain a joint R&D (JRD) setup in which Foxconn was given the responsibility of developing
and testing selected mobile phones. Development of more complex mobile phones with new and
sophisticated technologies was still retained in-house in Denmark, but the more standardized and less
complex products with known techniques were outsourced to Foxconn. However, while the decision to
approach Foxconn was originally motivated by a need to release pressure on in-house product
development capacity, by 2010 the in-house/JRD organization had become a central facet of Nokia
Denmarks product development organization.
Recent developments in the Nokia environment had spurred lively debates as to how the company
should move forward. Indeed, as newly appointed CEO Stephen Elop expressed it: In the five weeks
since joining Nokia, I have found a company with many great strengths and a history of achievements
that are second to none in the industry. And yet our company faces a remarkably disruptive time in the
industry, with recent results demonstrating that we must reassess our role in and our approach to this
industry. Some of our most recent product launches illustrate that we have the talent, the capacity to
innovate and the resources necessary to lead through this period of disruption. We will make both the
strategic and operational improvements necessary to ensure that we continue to delight our customers
and deliver superior financial results to our shareholders.15 Changes to the company, its strategy and
organization were therefore inevitable, although it was impossible at this point in time to predict what
precisely would happen.
Still, the Danish management knew that the time would come when they would have to present, justify
and defend their strategy for how the product development division of Nokia Denmark should evolve.
Accordingly, three different strategic options had been outlined:
1. Nokia Denmark could scale up the JRD with Foxconn to eventually suspend more of the in-house
product development. While this seemed to be a highly drastic move, it would allow Nokia
Denmark to focus exclusively on more creative and value-adding activities such as the
architecture and concept mapping of new mobile phones.
2. Conversely, Nokia Denmark could phase out the JRD with Foxconn and pursue fully in-house
product development. This would require Nokia Denmark to employ more resources on simple

15

Nokia interim report, 2010, Q3.

standardized projects, but it would also save the costs of controlling and coordinating the
interfaces and interdependencies between the two companies.
3. The last option would entail a continuation of the parallel organizational structure that had
emerged in recent years. This could give Nokia Denmark the best of both worlds. However,
experience had shown that the balancing act between in-house and JRD product development
was far from straightforward.

Obviously, there were no easy answers to how Nokia Denmark should position its product development
in the future. Each of the strategic alternatives had its own benefits and disadvantages, and these
needed to be carefully identified, assessed and weighed against each other. Moreover, what would be
the consequences of pursuing one strategy over another? Cautious prioritization would determine
which qualified choice had to be made. However, given the broad array of stakeholders and
considerations that had to be included in the final decision, the Danish management knew perfectly well
that the task in front of them was indeed not an easy one.

COLOPLAST: TEN YEARS OF GLOBAL OPERATIONS

On a flight between the two Coloplast production sites in Hungary, Allan Rasmussen, senior vice
president at Coloplast Global Operations, thought about how to prepare his speech for the forthcoming
Capital Market Day. By 2011, Coloplast the worlds leading supplier of intimate healthcare product
and services was standing stronger than ever before, with growth in profits averaging 23 per cent
over the last five years.
The seeds of this lucrative position could to a large extent be attributed Global Operations the
Coloplast division responsible for manufacturing and the supply chain and its success in establishing a
global footprint. Beginning in 2001, Coloplast began relocating major parts of the manufacturing away
from Denmark to Tatabanya in Hungary. A few years later, more production activities were relocated to
two new major production facilities in Zhuhai, China and Nyirbator, Hungary. Paralleled by a number of
other initiatives, Coloplast managed in the end to establish an international manufacturing footprint
consisting of eight production sites in five different countries, where 60 per cent of the production was
conducted in Hungary, 25 per cent in China, 5 per cent in the United States and France, and the
remaining 10 per cent in Denmark.
Despite Coloplasts recent success, however, Rasmussen was well aware that the situation in Global
Operations had not always been bright. Indeed, the past ten years rather bumpy journey had taught
Coloplast the process of transforming a domestically centered Danish manufacturing company to
become a truly multinational corporation with a global supply chain was not a straightforward task. A
number of problems and challenges such as empowering the new subsidiaries, adjusting the
organizational requirements and identifying the detrimental organizational complexities stemming from
the international interfaces forced Coloplast to take stock of Global Operations. It was time for Allan
Rasmussen and the Coloplast executive management to understand what the last ten years had taught
them. Could Coloplast have prepared its manufacturing internationalization process in a better way?
The relocation to low-cost countries had to a large extent been carried out as a trial-and-error process
without the guidance of an overarching corporate strategy. A relevant question therefore related to
how Coloplast could formulate and successfully implement strategies for international manufacturing.
How could Coloplast better balance its attention between domestic and foreign activities? While the
foreign activities were largely performing as they should, Coloplast had noted that failure to adjust the
domestic part of the organization alongside Global Operations global mandate was the root cause
behind an underperforming organization.
Rasmussen had two weeks to prepare his speech for the Capital Market Day, where key shareholders
would gather to learn about Coloplasts situation and future strategies. The strong performance growth
over the last couple of years was a strong indication that Coloplast, and in particular, Global Operations,
was on the right track. Rasmussen`s main task was to convince the audience Coloplast had learned
valuable lessons over the last ten years about the establishment of a global manufacturing footprint
that would support and reinforce future prospects. How, and with what focus, this should be done,
however, were questions he did not yet have answers to.