Cce 7 Danfoss Final

Semester project Class 6Y International Sales & Marketing Management

Executive Summary The Indian market is getting more and more appealing to international businesses, the company who enters the market first, can achieve a leading position in the industry. Danfoss is a Danish company that has a variety of products from heating solutions to energy sufficient drivers. The company has established a good position in the country with a range of refrigerated solutions, flex-lines, power solutions etc. Because of the lack of financial

support from the government, India is lacking both - finance and the knowledge in water scarcity. In order satisfy the growing demand for clean drinkable water, relevant theories and models have been implemented for Danfoss to gain the market leader position. As an international well-know brand, Danfoss wants to gain profit, as the product itself is a driver that is added to be more energy sufficient as a waste-water plant. The concept will benefit everyoneas the demand will be satisfied, Danfoss will gain profit and vacancies in the job market will appear for locals. This project provides a clear overview of the waste-water treatment industry in India. Relevant research and analysis have been conducted to highlight and backup data for the company. Foremost as the projects problem statement, the main question is How can Danfoss a successfully enter the water treatment industry in India and gain and the market leader position.

Contents Executive Summary.................................................................................................... 1 Introduction................................................................................................................ 3 Problem formulation................................................................................................... 4 Methodology............................................................................................................... 4 Limitations and Delimitations..................................................................................... 5 Internal analysis......................................................................................................... 6 Organizational plan.................................................................................................... 6 Business frame........................................................................................................ 6 Values................................................................................................................... 6 Mission................................................................................................................. 7 Vision................................................................................................................... 7 Goals.................................................................................................................... 7 Business model....................................................................................................... 8 Customer segment............................................................................................... 8 Value proposition.................................................................................................. 8 Channels.............................................................................................................. 8 Customer Relationships........................................................................................ 9 Revenue streams................................................................................................. 9 Key resources....................................................................................................... 9 Key Activities...................................................................................................... 10 Key partnerships................................................................................................ 10 1

Reduction of risk and uncertainty......................................................................10 Cost structure..................................................................................................... 11 Impact of stress in the organization......................................................................11 Supply chain.......................................................................................................... 12 Marketing mix....................................................................................................... 14 Product............................................................................................................... 14 Price................................................................................................................... 15 Promotion........................................................................................................... 15 Place.................................................................................................................. 15 External analysis...................................................................................................... 15 PESTLE.................................................................................................................. 15 Political............................................................................................................... 16 Economical......................................................................................................... 16 Social................................................................................................................. 16 Technological...................................................................................................... 17 Legal.................................................................................................................. 17 Environmental.................................................................................................... 17 Influence of stress in the organization...................................................................17 Porters 5 forces..................................................................................................... 19 The threat of new entrants.................................................................................19 The bargaining power of suppliers.....................................................................19 The bargaining power of buyers.........................................................................20 Threat of substitutes.......................................................................................... 20 Industry competitors.......................................................................................... 20 SWOT.................................................................................................................... 21 Strengths............................................................................................................ 21 Weaknesses....................................................................................................... 21 Opportunities..................................................................................................... 21 Threats............................................................................................................... 22 Summary............................................................................................................ 22 Balanced scorecard............................................................................................... 22 Learning and growth.......................................................................................... 22 Internal Business Processes...............................................................................23 Customer............................................................................................................ 24 Financial (Key performance indicators)..............................................................25 2

Conclusion................................................................................................................ 26 List of literature used............................................................................................... 27 Reference list............................................................................................................ 27

Introduction Danfoss was founded by Mads Clausen back in 1933 in Nordborg, Denmark. Currently Danfoss is the world-leader in the supply of technologies; solutions that support the growing need for sustainable food supply, modern infrastructure, efficient energy utilization; and better climate control1. Company employs around 24000 people, has factories in 19 countries and serves customers in more than 100 countries2. Three main operating regions are Europe, North America and Asia-Pacific with share of total net sales of 51%, 24% and 19%respectively. Today company invests 4% from sales into innovation in order to ensure continuous stream of new solutions.This has led to an average of one patent granted every day. Most of the effort goes to finding more efficient ways of using the energy. Company’s strategy is based on four core elements3 that are as follows: Core and clear portfolio – having strong leading positions globally in the core businesses being positioned as number one or two in the markets. Free and agile – ensuring Group’s ability to rapidly adapt to market developments and having a flexible and competitive supply chain. Customer and innovation – providing value to customers by delivering on their promise of quality, reliability and innovation based on customer needs. Passion and performance – building capabilities and engagement to drive strong performance and execute on the Danfoss strategy. Danfoss as well invests into educational purposes, such as scholarships to students that are directly or indirectly connected to Danfoss. Also through the Bitten and Mads Clausen

1http://www.danfoss.com/sustainability/ambitions-and-obligations/ 2http://www.danfoss.com/about/facts-and-history/ 3Danfoss’ Annual Report 2014 3

Foundation an establishment of Danfoss Universe, the Mads Clausen institute, the Danfoss Center of Global Business, University of Southern Denmark etc. was made4. The Group continued its vigilant focus on the growth potential in India and saw growth in local currency of 10%. Since it is second largest market after China, Danfoss has already opened a large new India Campus, including production and development facilities. Even though Danfoss’ cooling and air-conditioning business has a great potential, the water treatment business is also seen as of with a great growth potential.

Problem formulation After a brief overview of potential global regions with a free market niche to occupy, as Danfoss stumbled upon an existing problem of consistently increasing scarcity of clean water supply in India as well as poor sustainability indicators. Danfoss already has a developed efficiency improving solutions which are aimed to increase all performance and efficiency indicators within water supply and treatment industry. Based on the assumptions of current situation of water supply and treatment in India, there was made a decision to conduct relevant more specific research aimed towards analyzing market opportunities of successful implementation of water sustainability improvement products in South-Eastern region of India, starting in from the central part of chosen region.

Methodology This project contains models, definitions and theories are gathered from various sources. Book literature, internet sources and theories are just to name a few. A positivistic philosophic approach is used in this assignment, it can be explained as -The positivist ontology believes that the world is external (Carson et al., 1988) and that there is a single objective reality to research phenomenon or situation regardless of the researcher’s perspective or belief.5 An inductive approach as defined by Goddard and Melville: inductive approach starts with the observations and theories are formulated towards the end of the research and as a result of observations.6 4http://www.danfoss.com/about/foundations/ 5 https://prabash78.wordpress.com/2012/03/14/interpretivism-and-postivism-ontological-andepistemological-perspectives/ 6Goddard, W. & Melville, S. (2004) “Research Methodology: An Introduction” 2nd edition, Blackwell Publishing 4

Strategy is based on grounded theory. The definition explains why “Grounded Theory is an approach for developing theory that is "grounded in data systematically gathered and analyzed."”7 Accuracy therefore is not guaranteed, as relying on secondary data in some cases can be misleading. Multi research includes both quantitative and qualitative data, the benefits of the research can be explained as: Multi-method analysis increases the possibilities of getting varied and extensive results.8 Cross-sectional time horizon promotes both qualitative and quantitative moreover explained as useful in our study environment. “A cross-sectional study is an observational one. This means that researchers record information about their subjects without manipulating the study environment.”9 Supply chain analyses risks lowering opportunities in the logistics field, starting from suppliers and ending with the end user. Porters 5 forces modelexamine the rivalry mechanismsand effect onDanfossby key elements of bargaining power of the supplier, threat of new entrants, bargaining power of suppliers, threat of substitute products thus explaining the competitive rivalry within an industry. PESTEL analysis explains the external environment of India, Political, Social, Technical, Environmental and Legislative and how it impacts the business. All of these combined would explain possibilities and barriers when entering the Indian market. Marketing Mix-4p’s is going to explain core elements of competitive advantage: product, price, place and promotion fromchosen productperspective. Balance scorecard would give an overview of how we could analyze the strategic planning and management system in the future when the strategy is already implemented in the future, basically analysis of all non-financial aspects of the business. Key performance indicators(KPI) are a business metricsthat are used to evaluate the financial factors, thus showing achieved performance in a tangible matter. Value Proposition Canvas is applied for more detailed examination of customer segmentwithin business model. In Business Model Canvas a new business strategy proposal is created. Short description about the core components of implementing a strategy proposal which would have a short but concise explanation.

7Strauss, A. & Corbin, J. (1994)."Grounded Theory Methodology." In NK Denzin& YS Lincoln (Eds.) Handbook of Qualitative Research (pp. 217-285). Thousand Oaks, Sage Publications. 8 https://koppa.jyu.fi/avoimet/hum/menetelmapolkuja/en/methodmap/strategies/multimethod-research 9 http://www.iwh.on.ca/wrmb/cross-sectional-vs-longitudinal-studies 5

Limitations and Delimitations10 The product analysis isbased onDanfoss’ “VLT® AQUA Drive” product range according to the stated problem formulation. Market analysis is limited to South Indian regiondue to optimallocation of existing infrastructures. Business environment analysisincludes entireIndia to provide wider overview of future opportunities. Chosen markets rivalry examination is limited to assumedmechanism and expected reaction to proposed competitive advantages. Competitor companiesare not included in the market competitive forces analysis due to limited total length.

Internal analysis Organizational plan11 Organizational plan can be defined as:Process of identifying an organization's immediate and long-term objectives, and formulating and monitoring specific strategies to achieve them. It also entails staffing and resource allocation, and is one of the most important responsibilities of a management team.12

Business frame13 For the company, sustainability is its ethical work flow obligation and its value driven logic promotes an intention to provide the most environmentally friendly technological solutions with lowest energy consumption and CO2 waste. Danfoss’ core concepts of values, mission and vision 10https://www.bcps.org/offices/lis/researchcourse/develop_writing_methodology_limi tations.html 11 12http://www.businessdictionary.com/definition/organizational-planning.html 13 6

are well synchronized with current business proposal and will therefor remain the same. Reason for keeping values, mission and vision unchanged is to avoid unnecessary investments and changes to the organizational structure. Values

Danfoss plays an active role in sustainable global development, where social responsibility, the environment and climate considerations go hand-in-hand with sound business development.14 Mission

“We help get more out of less with our energy-efficient technologies .”15

Vision “We will master advanced heat control technology that optimizes user comfort and energy savings.”16 Goals

Goals in a given situation could be set in a different way in order to ensure that short-term plans and long term-plans would be equally feasible in the long run. Short-term plans are to create the characteristics of the company that constantly develops and improves strategies. Another short-term goal is to reach certain amount of sales in water supply and treatment components market in South part of India. Given region is chosen due to the fact that Danfoss already has a factory there which would have a positive affect at delivery time and costs. Long-

14http://www.danfoss.com/sustainability/ 15http://devi.danfoss.com/North_America/About+DEVI/About+Danfoss/1.0+Vision+Mission+ and+Values/ 16http://devi.danfoss.com/North_America/About+DEVI/About+Danfoss/1.0+Vision+Mission+ and+Values/

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term goals are to continuously expand company’s presence in the chosen market and to reach number one positioning according to the market share. The cognitive, behavioral process of developing a sequence of activities and creative activities to achieve a foal would be oriented by the goal-oriented planning. Goal-oriented planning is as defined “The process of determining the activities and steps from an existing state to a clearly defined end state.”17 Planning style when implementing goal-oriented would be long-term plan. Reason for the choice is as follows “Often in place for three or more years; end point not always determined; can be complex and require substantial resources”18 Steps in the organization on goal achieving will be divided in smaller sub categories-goals, sub goals, milestones and action steps. Corporate strategy for Danfoss is heading towards growth strategy – “A corporate strategy that involves expansion of operations and/or anincrease in the market share”19. One of the strategies which are used is a joint venture. At a competitive level a niche strategy -“Catering to a particular segment of the market or a particular demand”20

17 Lars Davidsen(2012), Management/Organization: BA of international Sales & Marketing Management. Chapter 5. Page 5 18Lars Davidsen(2012), Management/Organization: BA of international Sales & Marketing Management. Chapter 5. Page 9 19Lars Davidsen(2012), Management/Organization: BA of international Sales & Marketing Management. Chapter 5.Page. Page 18 20Lars Davidsen(2012), Management/Organization: BA of international Sales & Marketing Management. Chapter 5.Page. 21 8

Business model Customer segment

Target segment in given case is represented as niche of big production plants, municipal water supply-purification facilities and other types of industries that are dealing with high amounts of water supply needs. Value proposition

The value provided by Danfoss’ water treatment line is high-performance solutions which optimize energy usage efficiency and provide supreme reliability within the water treatment industry. Danfoss is offering solutions that improve sustainability. As well to use saved resources (energy, water, human resources) in other aspects of the industry and reduce costs. Danfoss differentiates value by providing lifetime reliability and world-leading after-sales service.1 The dedicated solutions with a broad power range, active and passive filters for EMC and harmonics mitigation provide the most flexible and yet dedicated energy optimization method available for water or wastewater plants.2 Channels

Direct sales - Danfoss is selling directly through its retail chain and sales representatives. Awareness is increased by presenting technological benefits of Danfoss products to relevant audience (personal meetings, exhibitions, forums) Evaluation is made by presenting existing examples of successfully implemented technological solutions to a potential customer group. Demonstrations of improvement, that has been made on the energy consumptions and overall efficiency. Purchase process in India is described as direct sales since it will be carried out through Danfoss’ sales representatives in given area. Delivery channels can be collaborated with partners. Sharing the responsibility in the value chain will lower risk and cost of logistics. After sales activities are supported by the company itself.Danfoss has a robust reputation of an outstanding customer service. Proximity to the production plant will lower the cost transportation furthermore delivers world-class support on a local level.3

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Customer Relationships

Since Danfoss is leading the market, there can be multiple clients who will share common significances that will lead to a better knowledge of unexpected issues. As every implemented project is approached separately, as known every case contains unique aspects. Resolving the issue is expected almost immediately, as of that the solution will prevent from future negativeculmination. Essentially both treatment and maintenance is conducted by experts who have established a certain level of knowledge and professionalism of the field. Revenue streams

The main revenue stream is positioned in asset sales and patents. Because of the complex field, the assets are mostly physical products in the waste-water industry. Which could be categorized as spare parts, treatment or utilities for the plant. By entering a joint venture partnership with Aliaxix, the responsibility is shared and by that the risk lowered. As the manner of design, promotion and installation is done in cooperation, to have a minimum negative impact. Key resources

Physical – modern and sustainable local production, supplementary and maintenance gear necessary to perform all after sales supporting activities. Included logistic vehicles, warehouses and offices owned by Danfoss. Intellectual – strong brand name and wide recognition, proprietary knowledge in advanced technology and patents. R&D activities are aimed to attracting more intelligence and to create their own by subsidizing engineering students. Of course, one of the main intellectual resource is the customers. Human – high-class specialists, engineers and management team who are responsible for troubleshooting, conducting relevant operations, procedures and development. Financial resource - covering funds for covering project implementation costs is being taken from a part of treasury shares which consist of 1.48% (622m) of group capital Key Activities

Production –located in close proximity to Chennai. Production plant has enough manufacturing capacity power to secure stable supply of systems and all the necessary components

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Problem solving – processes performed by experts, specialized in the right area. Experienced employees, who provide professional solutions in the shortest amount of time. Platform - Danfoss is raising sustainability to the new level. By is investing into excelling R&D process, in order to be more attractive to future partners, adding more value to the present partners and investors. Key partnerships

Danfoss is taking a leading global position within its industry. To sustain the position, Danfoss aims for partnership with companies who share the same perspectives of maintain the leading position. A shared aim allows the partners to contribute more into mutual growth and innovation. Optimization and economy of scale is an essential part of building a partnership with the suppliers. This allows the opportunity to negotiate and influence offered prices and concludelong-term contracts on exclusive conditions. As mentioned previously, the aim is towards a long-term collaboration between the parties. Reduction of risk and uncertainty

Basic risk and uncertainty can be reduced by creating stability, which is based on supply chain and value chain enforcement. Ensuring a sufficient amount of orders by concluding long-term contracts with the suppliers in the region and creating a strong partnership with companies using waste water equipment and treatment in the country scale. Financial risk can be exposed, as the clients orders will be caused by accrued payments. Since the company has established themselves over the years, Danfoss is one of few companies that owns most of its resource with multiple patents. Danfoss makes a larger investment to be more innovative and excelling in R&D, this makes the company more attractive to future partners and investors. More so - that it raises the sustainability to the new level . Cost structure

Cost structure is focused to create maximum value for customers. Optimizing cost drivers is crucial, in order to generate more value for both ends. Efficiency of costing activities is reflected in KPI. Operating costs optimization lowers price per produced unit, which allows to generate more revenue. Lowering prices for end user allows to sell more units and by that generating more revenue .

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Optimization of R&D process costs is done by improving the methods of testing the product, reducing the time between new products and solutions. This allows to stay highly competitive in developing and fast growing markets with financial flexibility and product diversity. ABC costing system comes helpful when estimating the cost drivers and impact of reducing or increasing expenses.Structuring and estimating, gives a clear overview of where it is available to generate revenue more efficiently and by that propose more value to partners and customers. Impact of stress in the organization Stress is very important factor that affects the efficiency and well-being of employees. It can be divided into two groups: positive and negative. Positive stress is the one that enhances the working ability, including overall outcome and negative is the one that decreases it, up to an absolute incompetence to carry out any working tasks. Negative stress can have a long term affect sometimes leading to early death and therefor requires a delicate approach within the company itself. This is mostly due to employees’ incapability to find balance between work- and family life or in other cases, over- or under load at work etc. as main stress factors. In order to have a better overview of stress level within the organization, it is important to provide proper communication and a certain level of flexibility towards employees when necessary. This means that when some employees are dealing with a negative stress that decreases their output, it is important to look for the roots of the cause first instead of warning them concerning lower output than expected. Warning concerning lower output may increase the stress level of an employee leading to even lower performance, mostly ending by capable employees being fired. In some cases physical exercising opportunity within working facility can be a good solution which is already being practiced by many facilities, including somehospitals. In more delicate situations, such as problems in private life etc. it is important to provide professional consultancy and/or some time off work, depending on the situation. Including these precautions in the organizational planning will slightly increase costs, but will ensure healthier environment within it and therefor higher employees satisfaction and overall output. Avoiding these precautions can lead to serious damage to employees as well as to the company itself. In many cases, people that are unable to deal with stress are more likely to get 12

into alcohol and/or drug addiction. This will often lead to immediately unnoticeable decline of the work efficiency and outcome that can cause high cost mistakes/delays for the company in the end. Another important factor of firing such employee instead of dealing with his/her situation in the proper manner is potential group attachment. Mostly people work in groups and play certain roles in them. Through long term collaboration people often get used to each other andlearn how to feel comfortable, safe and productive within these settled groups. By replacing one piece of a puzzle the overall picture might change dramatically. Also, depending on the position of the employee that is being replaced, extra costs for educating new employee can appear.

Supply chain Supply chain is a network of partners who collectively convert basic commodity (upstream) into a finished product (downstream) that is valued by end-customers, and who manage returns at each stage.21 According to the Annual Report, Danfoss very well recognizes its importance in the business the fact that we have created a world-class production and supply chain is best documented through the improved customer satisfaction rates seen over the past few years.22Many activities must be completed first before the products final placement, firstly they need to require the permission from the government and municipality, only then they are allowed to make their move. Supply chain would work well with its current efficient strategy-to stay ahead, we are applying the principles of Lean Thinking throughout. Through empowered people, 21 Alan Harrison and Remko van Hoek(2002), Logistics Management and Strategy. Chapter 1. Page 7 22http://danfoss.ipapercms.dk/Danfoss/Newsletters/AnnualReport/English/AnnualRe port2014/ page 11 13

eliminating non-value creating processes in all aspects of our business, we are continuously reducing lead times and responding with speed and innovation to customer needs.23 The business works efficient with an integrated make-to stock model. Danfoss has a large amount of suppliers although in India new ones are beneficial. A joint venture with a company that already has an impact in the market and is located nearby is seen as necessary for reducing entry costs and following risks. Aliaxis is the global leader in distribution and manufacture of plastic fluid handling parts that are used in commercial and residual constructions.24 This can benefit Danfoss by quickening the processes of final product dispense. A joint venture with mentioned company could as well contribute to Aliaxis’ specific needs, such as: “industrial process piping systems as well as some engineered products, such as tailor-made pumps and industrial ceramics.”25 As both of them would be partner’s benefits like leasing, business affairs, opportunity for income slitting and more. When components are received by Danfoss then manufacturing and operations occur. Danfossthen dispense these products to its retail stores and the few wholesalers in India and sell it to the end user. A factory is located inPune where starting a new product line would be a start. Lower risks and improvement in delivery time and costs from the very beginning would be a good sales strategy. All the unique water supply and water treatment technology could be imported from other Danfoss factories when needed, but it is more favorable to have an opportunity to produce them in the sales region. To decrease the cost and lessen the burden of creating new pipes, equipment etc., Aliaxis could become a supplier of all missing assets turning into Danfoss’ first tier supplier that is fully compatible with their technologies. Material supply will be transported by both sea freight forwarding and transporting by car- and railroads. Damco26 could become a third party logistics provider according to their past experience and given proposal: “We use this knowledge to tailor individual solutions that can help customers 23http://www.danfoss.com/Asean/BusinessAreas/IndustrialAutomation/ 24http://www.aliaxis.com/ 25http://www.aliaxis.com/index.php?id=157

26http://www.damco.com/ 14

make well-informed decisions, reduce lead time, optimize cash flow and keep taxes to a minimum.”27 Transportation of parts from Aliaxis could be made by trucks whereas other parts and materials by sea freight forwarding, both transportation methods are provided by Damco. Some additions to the existing infrastructures should be expected due to increase of operational capacity. It is important to build positive relationships with mentioned potential partners due to their wide geographical presence. Since they are both globally operating companies, positive relationship would have a positive affect at Danfoss’ control over the supply chain in many countries.

Marketing mix28 Marketing mix is based on four P’s that stand for: product, price, promotion and place. These four core elements of the marketing mix make the basis of creating competitive advantage. Product

The product called “VLT® AQUA Drive29” is a main electronic component used in water treatment plants and is also available with different purpose products from the same series. It is made to run water plants and is designed to perform in the most efficient way possible. Today it is said to be the lowest energy consuming water treatment plants driver on the market. It is applicable in nearly any, if not any kind of water treatment plant. The main product itself is a 27http://www.damco.com/Service/CustomsTradeCompliance.aspx

28http://www.mindtools.com/pages/article/newSTR_94.htm 29http://vlt-water-wastewater.danfoss.com/products/ 15

heart for any water treatment plant that controls all functional electronic components in the system. It is also available with additional parts from the same product series that can cover all applications of a plant. The product is currently differentiated from competition by most effective appliance of high-tech solutions in the heart of any water treatment plants. Price

Premium price is set due to technological leadership positioning in the market. It is backed up by constantly generated energy savings, which competitors have not been able to repeat yet. Promotion VLT AQUA Drive offers very efficient installation and commissioning solutions which, compared to traditional VSDs, offer cost saving of between 10-20%. 30Given

technological solution can save up to

25% of investment per year due to optimized energy usage.31 In addition to the most money saving technological solution for running water treatment plants, company also offers lifetime reliability and world leading after-sales service. Danfoss shares stories of their customers via their official website in order to spread a positive word about their past and current experience. Place

In the early stage all sales will be carried out in the city Karnataka sales office due to its optimal location in the central part of South India. Sales will be carried out by Danfoss’ representatives and distributors through skilled sales engineers and factory-trained technicians. Company will also be available through their official website.

External analysis PESTLE32 30http://vlt-water-wastewater.danfoss.com/themes/installation-savings/ 31http://vlt-water-wastewater.danfoss.com/themes/energy-savings/ 16

PESTLEis a model for making an overview of the business environment by examining its key elements, such as: political-, economic-,social-,technological-, environmental- and legal issues. Political

India is one of the largest democracies in the world which runs on a federal form of government. Government’s policies, ideologies of several political parties and politician’s interests greatly influences the political environment. Businesses have to take into consideration that policies made by the government also intervenes in the nation’s economics. Political decisions on nation’s health, workforce education and infrastructure quality of a nation is an obstacle all the businesses have to face when they plan to enter the market or sell a new product. Environment also takes place in political aspects as mentioned in an article by Michael Schuman: “Perhaps India can develop in a more sustainable and balanced way than China, without the excessive waste and environment degradation that breakneck expansion spawned”33. Danfoss then has strong position and influence in global politics. As mentioned, Danfoss already has a factory in India in the city of Chennai, which is proof that all of the requirements and obstacles like sustainability has been already met. Danfoss has proven itself to be a reliable and stable company so expanding its products that would help in the cause of fighting water scarcity should give a good reason for the government support.

Economical

Indian economy is stable with a GDP of $5.07 trillion in the year 2013 and further increase of 5% in 2014. The relatively big progress is thanks to the industrial reform policies due to significant changes as “In 1991, 51% of foreign investment in 34 high priority industries was allowed without seeking government permission”34. The economic environment has gone through reductions in industrial licensing, formation of foreign investment promotion board, liberalization of foreign capital, investment on crowded public sector enterprises, granting permissions on foreign technological agreements. Indian economy demonstrates stability due to 32http://www.professionalacademy.com/blogs-and-advice/marketing-theories--pestel-analysis 33 http://www.bloomberg.com/news/articles/2015-02-12/india-s-economy-surgesyet-politics-remain-obstacle 34http://www.yourarticlelibrary.com/economics/7-major-steps-of-economic-reformstaken-by-government-of-india/899/ 17

its decision to have the Global economic re-adjustments. Water utility is scarce at the moment, where the demand for water treatment is rising. Social

The business environment gets impacted by the ongoing social trends, so a track of changes is necessary. India has a population of over 1.2 billion, about 70% of the populations is in the age between of 15 and 65. India has an aging population, which has caused the rise in pension costs and even employment of older workers. Structures vary from one to another due to age and groups of people living in specific areas. Structures contain varying flexibility in work attitudes, education, and income distribution and so on. Healthcare system in India is decent, where the quality differs to the extent of the urban and rural areas, between public and private healthcare. Danfoss water supply and water treatment provides a solution to healthcare issues concerning water contamination. Technological

Technology greatly influences product development and introduces a fresh cost-cutting process. The country possesses one of the strongest IT sectors in the world, promoting constantly its development and software advancements, which would change the ongoing business activities. IT actually extends the reach of medical treatment to remotest parts of India. Legal

Legal changes, such as minimum wage increase, disability discrimination and recycling are some of the areas that have directly affected by industrialization and urbanization, also resulting in health problems and affected businesses. Business operations are impacted by following reference “legislation specifically aimed at business operations include the Trade mark Act 1969, Essential Commodities Act 1955, Standards of Weights and Measures Act 1969 and Consumer Protection Act 196.”35 Environmental

The quality of air has been affected by urbanization and industrialization, which has gained health problems. Due to these issues there have been establishments of environmental pressure groups, regulations on waste controls, disposal and noise controls. The water issue arising from India has started causing problems to people living in Bangladesh. India is expected to become a net importer of grain and if it is affected by water scarcity, it might lead to global changes in food prices. As the article explains about the situation - “India needs to make water supply a national

35http://www.ukessays.com/essays/economics/the-meaning-and-importance-ofbusiness-environment-economics-essay.php 18

priority the way it has made food security and economic growth priorities in the past”36. There are still areas without a proper water supply in India, such as Burari in New Delhi. The government is sending trucks with water tanks in order to provide citizens with clean water supplies. Such solution is highly costly and requires an immediate development of necessary infrastructural solutions for the problem.

Influence of stress in the organization Stress is very important factor that affects the efficiency and well-being of employees. It can be divided into two groups: positive and negative. Positive stress is the one that enhances the working ability, including overall outcome and negative is the one that decreases it, up to an absolute incompetence to carry out any working tasks. Negative stress can have a long term affect sometimes leading to early death and therefor requires a delicate approach within the company itself. This is mostly due to employees’ incapability to find balance between work- and family life or in other cases, over- or under load at work etc. as main stress factors. In order to have a better overview of stress level within the organization, it is important to provide proper communication and a certain level of flexibility towards employees when necessary. This means that when some employees are dealing with a negative stress that decreases their output, it is important to look for the roots of the cause first instead of warning them concerning lower output than expected. Warning concerning lower output may increase the stress level of an employee leading to even lower performance, mostly ending by capable employees being fired. In some cases physical exercising opportunity within working facility can be a good solution which is already being practiced by many facilities, includingsomehospitals. In more delicate situations, such as problems in private life etc. it is important to provide professional consultancy and/or some time off work, depending on the situation. Including these precautions in the organizational planning will slightly increase costs, but will ensure healthier environment within it and therefor higher employees satisfaction and overall output. Avoiding these precautions can lead to serious damage to employees as well as to the company itself. In many cases, people that are unable to deal with stress are more likely to get into alcohol and/or drug addiction. This will often lead to immediately unnoticeable decline of the work efficiency and outcome that can cause high cost mistakes/delays for the company in the 36http://www.arlingtoninstitute.org/wbp/global-water-crisis/606 19

end. Another important factor of firing such employee instead of dealing with his/her situation in the proper manner is potential group attachment. Mostly people work in groups and play certain roles in them. Through long term collaboration people often get used to each otherandlearn how to feel comfortable, safe and productive within these settled groups. By replacing one piece of a puzzle the overall picture might change dramatically. Also, depending on the position of the employee that is being replaced, extra costs for educating new employee can appear.

Porters 5 forces37 Porters 5 forces model explains that the state of competition and profit potential in an industry depends on five basic competitive forces: new entrants, suppliers, buyers, substitutes and market competitors. Given model will be applied in order to examine current competitive forces on the Indian market of components for water treatment and supply plants. The threat of new entrants

Threat of new entrants in chosen market is considered to be low due to Danfoss’ technological leader positioning in the world. Therefor there are not so many companies that could provide serious competition, but the threat remains on medium level due to high and continuously growing market potential. The cost of entry remains high due to increased delivery costs and/or investments required to set up own production site in the region. Danfoss already has production facilities in given region allowing it to take advantage of delivery costs as well as time. Chosen markets potential is hard to satisfy by one company in a short period of time this creates opportunity for potential competitors to take short term advantage. This opportunity is counterbalanced by long term rivalry that will make it difficult for technologically or financially weaker opponents to survive. Even though the switching costs are high, it is not considered enough to make the market attractive enough for the new entrants. The bargaining power of suppliers

37http://www.investopedia.com/terms/p/porter.asp 20

Bargaining power of suppliers is considered to be low, mainly due to Danfoss’ strong control over its supply chain. Company has already signed Code of Conduct with more than 2000 suppliers and can therefor threaten to integrate backwards into supply if needed. Since local suppliers cannot become key suppliers in given situation, it drastically decreases bargaining power of suppliers on Danfoss, even on the new markets. The bargaining power of buyers

Danfoss has a great potential of becoming dominant buyer in chosen market through time. Such positioning increases Danfoss’ attractiveness for the suppliers and therefor its buyer bargaining power. Company’s long history and strong reputation also have a positive affect at its bargaining power since it proves capability for long term growth, often up to number one or two positioning in operated markets. Combined with relatively small amount of buyers, the bargaining power of buyers is considered to be high. Threat of substitutes

The buyers’ willingness to substitute is considered to be low. This is mainly caused by long term value added by Danfoss’ optimized energy usage solutions. Technologically weaker competition will not be able to provide attractive price due to decision making process in the B2B markets, where long term value and reliability stand before the price of purchase. Without clear dominants over Danfoss’ products in energy consumption and reliability, the chance of switching by customer is absolute zero. In addition to this, the costs of switching to substitutes remain high. Industry competitors

There is a medium rivalry among competitors in the South part of India due to smaller market potential. This is caused by smaller population in given region which leads to less valuable orders. The amount of competent competitors in highly populated areas and cities like New Delhi, Mumbai and Kolkata is relatively smaller due to higher value deals setting higher expectation towards reliability and added value. This is driven by two main factors that eliminate weak competition: high switching costs greatly influence expectations concerning the products efficiency and quality. Switching costs might remain the main barrier for taking over the high 21

value projects until the end of existing components lifetime. Danfoss differentiates itself by most effectively applying high-tech solutions in the water treatment plants control systems. This ensures its high competitiveness in multiple parameters which relates to build as the most suitable strategic objective.

SWOT38 SWOT analysis is a structured approach to evaluating the strategic position of a business by identifying its strengths, weaknesses, opportunities and threats. It provides a simple method of synthesizing the results of the marketing audit. Strengths

Long existing and well respected brand. Tightly focused in a specialist niche market. World leader positioning in core business. Represented in more than 100 countries with factories in 19 countries. Invests 4% from its sales to ensure continuous development. Highly innovative and a competitive company. Ability to rapidly adapt to the market developments. Flexible and competitive supply chain. Danfoss ensures that none of the unwanted substances are used in their production nor in the products. Danfoss complies with the requirements of European Union’s chemical regulation REACH2. Safety is of a high importance for the company at all levels. High price segment ensure high profit rates. High price segment due to very strong value added Weaknesses

Weakly present on the Indian market. Limited delivery speed.

38 Jobber David, “Principles and Practice of Marketing”, McGraw-Hill Education, 2010, page 46 22

Opportunities

Water scarcity in India creates high market potential for water treatment plants. Huge population in India remains in a growth stage and therefor the scarcity of fresh water supply will increase as well. Importance of technological development puts an accent on the cost-cutting solutions. Stable growth of GDP of up to 5% yearly. Growing demand in the industry. Continuously growing market potential. Threats

Lack of specialized workers. Tax changes. Markets growing potential increases threat of new entrants. Summary

Company’s only weaknesses are related to low activity on a highly potential market. By entering Indian water treatment plants components market the company will diversify its product portfolio and therefor overall presence in the area. According to expectations based on the chosen products distinct competitive advantages over any competition, the company is expected to start delivering on a pull basis. It is important to enter the market while the market potential remains very high in order to get highest possible market share. In case of low market need, an additional strategy might be developed to increase government interest to take a part of decreasing water scarcity in the country.

Balanced scorecard39 The Balanced Scorecard measures organizational performance across four different but linked perspectives that are derived from the organization’s mission, vision, and strategy.40

39http://balancedscorecard.org/Resources/About-the-Balanced-Scorecard 40 Robert S. Kaplan(2011), Management Accounting. Chapter 2. Page 19 23

Learning and growth

Diversifying existing product portfolio will require hiring new employees to ensure required delivery capacity. The plan for entering Indian water treatment market requires certain knowledge and skills from Danfoss’ employees. It includes understanding of the company’s role in given market, its delivery capability as well as its expectations towards the overall outcome. The company’s role is not to provide the entire water treatment system but to come up with solutions that will save energy and for them and upgrade the utility to the modern standard level. Therefor it is important to have educated engineers who are highly competent regarding every aspect of systems that keep Indian water treatment plants running. It is also important that the sales persons understand significances of Indian business culture and be eager to help to achieve company’s financial goals. Companies involved in joint venture should as well concentrate at learning from each other. This is especially important when it comes to creating combined technological solutions. In order to achieve necessary knowledge and understanding level within staff, training has to be provided. For measuring the outcome of the trainings, an exam or a test should be made. Also, measuring employees’ professional competence, overall productivity and comparing it with expectations is a necessity. The motives of training type and purpose are dictated by the requirements of employees’ current positions. As for example, sales personnel should clearly understand the product portfolio. Also, ways how these products can be proposed to the customer in different diverse companies and what is the basis of pricing strategy of each. As for engineers, the quality expectation and aspects of practical use should be brought higher than the product price. Providing smooth information flow at all organizational levels has a positive affect at unifying different departments in the organization. It is necessary for all departments to understand how they are expected to perform in order to achieve company’s strategic goals. Since different departments depend on each other, performance of one affects expected performance indicator of others. For example, expected manufacturing division performance fully relies on the performance of sales department in order to accordingly conduct manufacturing capacities.

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Internal Business Processes

Since Danfoss is trying to enter the Indian market with energy saving solutions for water treatment it is visible that it follows the lead of innovation strategy. Since the market is in need for water treatment because of the lack of clean water sources available for masses. In a large scale of a country with growing population number it is a win-win situation. By offering the solutions the company is satisfying the need of the customer as well of their own aims which is financial. By looking in to the other relevant theories, there is a clear sight of an available entry and profit in this area. One of the main processes is to have is that research is done as specifically as needed. It is important since the work flow will be collaborated, so in order to get the best results, both parties will have to have extra training to get to know how both businesses work. As mentioned previously, the company has a good base with social media, so for the customer to have a better view and feeling about the company a specialized hotline or customer support line will be offered. On top of that, specific employees are assigned, so specific work tasks so the information won’t get lost in the middle.

Customer

In order to achieve the best vision of what will profit Danfoss, it is mandatory “to see what the company sees in the customer”41. The customer in this case is the partners that are chosen for joint venture as well as the other businesses we will provide the product to. It is important to understand that in the customer perspective the main aim is not only in the customers who pay for the products but partners, distributions etc. as well. To secure a valuable product to the customers, Danfoss needs to secure the objective with value proposition details like product quality and a pleasant experience when communicating. 41 http://www.bscdesigner.com/customer-perspective.htm 25

Since Danfoss is well-known in the market with their quality and innovation, which will help gaining trust in the customers already. When it comes to experience, the best way to ensure of the clients response is to have a customer support line that will help in case of technicalities. Of course all the people who will be working in collaboration will have a specific training done. By that we will ensure that all employees who work closely in the area is with top knowledge about the product and service. When it comes to partners, the Danfoss aims to get involved and keep a win-win relationship. In order to achieve goals in the relationship, both parties must agree upon the product price, if it can be reduced, availability of certain amounts and of course the key partnership program. The key partnership is focused on embracing the concept of collaboration between two parties in the way to create mutual benefits and share common perspective of the main task which needs to be tackled. Financial (Key performance indicators)

As known, Danfoss is a profit-driven company lean-thinking supply chain management which is a sustainability based business model. There are three different frameworks that can help in measuring key performance when it comes to financial performance assessment. Since the main objective which is being highlighted in this project it to enter the Indian market with waste water treatment, the theories and models used, previously, have shown that a joint venture would be the best way to enter without using too much financial resources or creditor provided assets. High ROE ratio is the main financial goal in this case, since budgeting for this project implementation is being taken from treasury share fund. The whole concept behind operational excellence strategy42 is decreasing cost and optimizing resources. Danfoss, as a global company with organic growth, decided to choose a strategy of sharing information and technology. That will save up resources when it comes to research and development. When it comes to executive level, the core objective is cost optimization and decrease. +

42http://www.operational-excellence-consulting.com/our-opex-model.html 26

The research and development objective is to find ways to decrease the production cost. The leading measure for that is having a larger number of experts making assumptions about the problem statement and solution tactics. Senior engineering levels objective is to decrease the product testing cost. Lagging measurements would be achieving the reduction cost of testing. The key indicator here might be number of solutions proposed and described. Decision based on former assumptions and observations, the best way to get to the main objective is a joint venture with same time “A player” on the global arena. Since India has a problem with having only two water suppliers in the whole country, Danfoss is winning not only because of success potential sales success, but it can also be subsidized on the state level to optimize water sustainability in the country.

Conclusion Danfoss is a internationally recognized company with a strong brand identity. As many awards and recognitions that they have won, only backup the success stories. As developing countries usually lack on a market leader, the competitiveness on the market is attracted. Havingthe financial independence gives only tools to become a respected brand on the global scale, a well-known brand is has two main cores, a respected company is expected to be effective and creative. As known innovation is one of the leading quality of Danfoss. Danfoss has led a wave of success worldwide. Nevertheless of the companies wide product range, being up to date is not an issue as the product portfolio is renewed every quarter of the year to ensures being up to date.For all the data and analyses that was conducted in the project we're applied to fulfill the requirements of the assignment. As a future prospect, it was decided upon an statement, which is the base of the project. The statement is how Danfoss can enter the Indian market and maintain of having success. One of the competencies the company gained with the brand is the quality of the product. As a sum up of all the theories, models and analyzes used, it is clear that Danfoss is a well-established brand with a big worldwide network. The frame of the business is based on solid goals and vision for the future. As it goes for what the customer wants, Danfoss is up to the task. The corporation has established loyalty in the customers meaning that the company will stay in business as long as there is profit. The concept of entering the Indian market is since the product that Danfoss is selling, reduce the energy consumption, resolving the issue for clean water supply and adding job vacancies for locals that will reduce the unemployment rate and rise the general living standards. From the data gathered it is visible that most competition have established in New Delhi, Mumbai and Kolkat. As it goes to the size of the competitive companies, it could be measured as rather smaller, due to growing competition and expectations

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from the market since higher value deals are setting higher expectation towards reliability and added value. After a critical discussion of a product, the decision involved to enter the market of the VLT AquaDrive. When looking through the data gathered from the analysis sections, it became visible that there is higher rate of success. As known, Danfoss has established a reputation, of the products being efficient and easily installed and furthermore having a commissioning solution which, compared to the traditional ones, having the knowledge of key indicator for the customers is to save money and time,AsDanfoss has an advantage for their reputation which gives the necessary trust for the consumer the product is durable for a longer period of time. To sum up it should be known that the company strategy is based on four core elements and also invests into educational purposes, such as scholarships to students that are directly or indirectlyconnected. Danfoss will continue focus in different regions, where it is possible to either enter new market and/or gaining the market leader position. While continuously working on innovation and adding new product to the product line.

List of literature used. Goddard, W. & Melville, S. (2004) “Research Methodology: An Introduction” 2nd edition, Blackwell Publishing Strauss, A. & Corbin, J. (1994)."Grounded Theory Methodology." In NK Denzin& YS Lincoln (Eds.) Handbook of Qualitative Research (pp. 217-285). Thousand Oaks, Sage Publications. Lars Davidsen(2012), Management/Organization: BA of international Sales & Marketing Management. Chapter 5. Page 5 Lars Davidsen(2012), Management/Organization: BA of international Sales & Marketing Management. Chapter 5. Page 9 Lars Davidsen(2012), Management/Organization: BA of international Sales & Marketing Management. Chapter 5.Page. Page 18 Lars Davidsen(2012), Management/Organization: BA of international Sales & Marketing Management. Chapter 5.Page. 21 Alan Harrison and Remko van Hoek(2002), Logistics Management and Strategy. Chapter 1. Page 7 Jobber David, “Principles and Practice of Marketing”, McGraw-Hill Education, 2010, page 46

Robert S. Kaplan(2011), Management Accounting. Chapter 2. Page 19

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Reference list http://www.danfoss.com/sustainability/ambitions-and-obligations/ http://www.danfoss.com/about/facts-and-history/ Danfoss’ Annual Report 2014 http://www.danfoss.com/about/foundations/ https://prabash78.wordpress.com/2012/03/14/interpretivism-and-postivism-ontological-and-epistemologicalperspectives/ https://koppa.jyu.fi/avoimet/hum/menetelmapolkuja/en/methodmap/strategies/multimethod-research http://www.iwh.on.ca/wrmb/cross-sectional-vs-longitudinal-studies https://www.bcps.org/offices/lis/researchcourse/develop_writing_methodology_limitations.ht ml http://www.businessdictionary.com/definition/organizational-planning.html

http://danfoss.ipapercms.dk/Danfoss/Newsletters/AnnualReport/English/AnnualRepor t2014/ page 11 http://www.danfoss.com/Asean/BusinessAreas/IndustrialAutomation/ http://www.aliaxis.com/ http://www.aliaxis.com/index.php?id=157 http://www.damco.com/ http://www.damco.com/Service/CustomsTradeCompliance.aspx http://www.mindtools.com/pages/article/newSTR_94.htm http://vlt-water-wastewater.danfoss.com/products/ http://vlt-water-wastewater.danfoss.com/themes/installation-savings/ http://vlt-water-wastewater.danfoss.com/themes/energy-savings/ http://www.professionalacademy.com/blogs-and-advice/marketing-theories---pestel-analysis http://www.bloomberg.com/news/articles/2015-02-12/india-s-economy-surges-yet-politicsremain-obstacle http://www.yourarticlelibrary.com/economics/7-major-steps-of-economic-reforms-taken-bygovernment-of-india/899/ http://www.ukessays.com/essays/economics/the-meaning-and-importance-of-businessenvironment-economics-essay.php

http://www.arlingtoninstitute.org/wbp/global-watercrisis/606http://www.investopedia.com/terms/p/porter.asphttp://balancedscorecard.o rg/Resources/About-the-Balanced-Scorecard http://www.bscdesigner.com/customer-perspective.htm

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