12. Developing and managing a market specific strategy
12.1. Internal analysis of HD & HDG
12.1.3. The Strengths of HD & HDG’s organization
Again the report will not offer a detailed look at potential financial strengths, which could come in the shape of having large financial resources available for investment in market opportunities, the ability to generate positive cash flow and the historic ability to make use of optimal gearing of equity and debt. Again these kinds of ratios and data should be readily available to the management of HD & HDG.
Instead this report will attempt to list the organizational assets and competences that are currently contributing or even more interestingly, can be contributing to the development of sustainable competitive advantages (SCA).
The author would like to acknowledge on the SCA criticism by Rita Gunther Mcgrath, a professor for management at Columbia Business School. She claims that strategies based on obtaining and defending SCA’s are obsolete due to the digital and flat transparent structure of today’s industries.
Strategy
Internal Analysis
People Structure
Systems Culture
Performance External Analysis
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Modern organizations should therefore accept that all competitive advantages are transient; hence strategies supporting pro-active development of new transient competitive advantages must be adopted.97 This is exactly what strategic market management is trying to promote, in the sense that constant monitoring of the external environment and internal performance, must be used to adopt pro-active market specific strategies.
The report will continue to use the term SCA though, as the author does not believe deliberately focusing on competitive advantages being transient instead of sustainable is going to raise the quality of the strategies that are put in place to create more of these advantages in HD. The concept of transient competitive advantages should however serve as a stark reminder for HD to “never rest on the laurels”.
The first and undoubtedly most significant strength of HD is their close bond to an array of supporting synergetic business areas, through the activities of Hedeselskabet/Dalgas-group. As it can be seen from the cooperate organization chart in Appendix 1, these partnering companies include;
Orbicon – Knowledge based company that offers consulting in fields of construction, environmental projects, technological innovation etc.
Xergi - A Company that specializes in the construction of biogas plants for utility companies.
Dalgas innovation – A Company that focuses on research and innovation of projects that is deemed likely to offer profitable returns to Hedeselskabet.
Hedeselskabet SP.zo.o – A Polish subsidiary of Hedeselskabet, that specializes in supply of landfill gas to utility plants in Poland.
The author believes the above mentioned companies and their close tie to HD / HDG is offering a highly unique SCA for HDG in Germany. This is postulated as the author believes that the link between the above companies and HD is the key reason for them being able to offer a market leading full supply-chain solution in Denmark. The focus of these individual companies, offers a synergy that makes HD specialist in a large part of their value chain.
97 http://hbr.org/2013/06/transient-advantage/ar/1
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The advantage is valued as being sustainable as competitors are unable to copy this set-up without having a learning curve to overcome. This advantage could theoretically become transient should a competitor acquire similar companies from a merger or acquisition move, or if Hedeselskabet fails to develop these companies to an extent where they are continuously offering valuable information
& innovation.
It would however seem that the effects of this SCA could be significantly improved, considering the fact that Niels-Joergen Pedersen admits to the fact that HD currently employ a sporadic “short term gains” approach to their International ventures. Strategic Market Management should assist in making better use of this, but more on that later…
A second strength is mentioned by Carsten Mortensen in his interview in appendix 17. This is HD’s market leading innovation skills, in developing machinery that raises the efficiency and lowers the costs of the process of making wood chips. This equipment also allows for HD to perform tasks that competitors are not able to bid in on, due to a lack of similar capabilities. It can be discussed
whether or not innovation can ever become a long-term SCA, as history has plenty of examples of companies were market leading innovators, that were left behind by the competition at key
moments. A good example is Nokia, who were the leading mobile phone manufacturer and software developer for these for many years, but by failing to react to the innovative trends of developing smart-phones, the power within this industry changed across to Apple & Samsung in particular. The same can be said for Kodak, who failed to adapt to the digital camera market.98 This supports Rita Gunther Mcgraths argument that resting on obsolete competitive advantages can be highly
deteriorating to the profitability or growth potential of an organization.99
Based on the reply from Carsten Mortensen in his interview, several other strengths in HD’s Danish organization, which are offering competitive advantages to their biomass division in the home market, is exactly what HDG needs to adapt in their strategy for the German biomass market. These advantages include:
Service superiority with full supply chain solutions
Large capacity due to position as market leader
98 http://www.radiologybusiness.com/topics/business/sustainable-competitive-advantage-enough
99 http://hbr.org/2013/06/transient-advantage/ar/1
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Easy access to raw materials
Positive customer reputation and high level of customer loyalty