Harvard Case - Desso (A): Taking on the Sustainability Challenge
"Desso (A): Taking on the Sustainability Challenge" Harvard business case study is written by Ioannis Ioannou, Amandine Ody Brasier. It deals with the challenges in the field of Strategy. The case study is 29 page(s) long and it was first published on : Sep 1, 2011
At Fern Fort University, we recommend Desso pursue a multi-pronged strategy to solidify its position as a leader in sustainable flooring solutions. This strategy will leverage Desso's existing core competencies in innovation, technology, and sustainability, while expanding its global reach, market penetration, and product portfolio.
2. Background
Desso, a Dutch company, is a leading manufacturer of carpet tiles and other flooring solutions. The company has a strong commitment to environmental sustainability, demonstrated through its innovative products and processes. However, Desso faces challenges in a competitive market with increasing pressure to achieve sustainable competitive advantage.
The case study focuses on Desso's efforts to navigate the complexities of corporate social responsibility, innovation, and globalization. The main protagonists are:
- Alexander Collot d'Escury, CEO of Desso, who is tasked with developing a strategy to position Desso for future growth.
- Desso's management team, who are responsible for implementing the chosen strategy.
- Desso's stakeholders, including customers, suppliers, employees, and investors, who have diverse expectations and demands.
3. Analysis of the Case Study
A. SWOT Analysis:
Strengths:
- Strong brand reputation for sustainability
- Innovative product portfolio
- Strong R&D capabilities
- Experienced management team
- Global presence
Weaknesses:
- Limited market share in certain regions
- High dependence on specific raw materials
- Potential for cost increases due to sustainability initiatives
Opportunities:
- Growing demand for sustainable products
- Emerging markets with high growth potential
- Technological advancements in manufacturing and recycling
- Partnerships with other companies for joint ventures
Threats:
- Intense competition from low-cost manufacturers
- Fluctuations in raw material prices
- Regulatory changes affecting sustainability standards
- Changing consumer preferences
B. Porter's Five Forces:
- Threat of new entrants: Moderate, due to high capital investment and technical expertise required.
- Bargaining power of buyers: Moderate, as large customers can negotiate favorable terms.
- Bargaining power of suppliers: Moderate, as Desso relies on specific raw materials.
- Threat of substitute products: Moderate, as alternative flooring materials exist.
- Rivalry among existing competitors: High, due to numerous players in the market.
C. Value Chain Analysis:
Desso's value chain can be analyzed through the lens of sustainability. The company focuses on minimizing environmental impact across all stages:
- Inbound logistics: Sourcing sustainable raw materials and optimizing transportation.
- Operations: Implementing efficient manufacturing processes with minimal waste.
- Outbound logistics: Utilizing eco-friendly packaging and distribution methods.
- Marketing and sales: Communicating the sustainability benefits of Desso products.
- Service: Providing after-sales support and recycling programs.
D. Business Model Innovation:
Desso has implemented a business model innovation strategy by focusing on product differentiation through sustainability. This has enabled them to command premium prices and build a loyal customer base.
E. Strategic Planning:
Desso's strategic planning should focus on:
- Sustainable competitive advantage: Developing and maintaining a unique position in the market based on sustainability.
- Global market expansion: Targeting emerging markets with high growth potential.
- Product development: Expanding its product portfolio to meet evolving customer needs.
- Strategic alliances: Collaborating with other companies to leverage resources and expertise.
4. Recommendations
A. Enhance Sustainability Leadership:
- Develop a comprehensive sustainability strategy that aligns with Desso's core values and business goals.
- Implement a robust sustainability reporting framework to track progress and communicate impact to stakeholders.
- Invest in research and development to develop innovative and sustainable products and processes.
- Partner with industry leaders and NGOs to promote best practices and advocate for policy changes.
B. Expand Global Reach:
- Target emerging markets with high growth potential and a strong focus on sustainability.
- Develop localized marketing strategies to resonate with diverse customer segments.
- Establish strategic partnerships with local distributors and retailers to expand distribution channels.
- Consider mergers and acquisitions to gain access to new markets and technologies.
C. Diversify Product Portfolio:
- Expand into new product categories within the flooring industry, such as wall coverings and outdoor flooring.
- Develop innovative solutions that address emerging trends in sustainability, such as bio-based materials and circular economy principles.
- Offer customized solutions to meet specific customer needs and preferences.
- Leverage technology and analytics to optimize product design and manufacturing processes.
D. Strengthen Brand Management:
- Enhance brand awareness through targeted marketing campaigns and social media engagement.
- Develop a strong brand identity that reflects Desso's commitment to sustainability.
- Build relationships with key influencers to promote Desso's products and values.
- Leverage digital transformation to create a seamless customer experience.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies: Desso's strengths in innovation, technology, and sustainability are leveraged to create a sustainable competitive advantage.
- External customers: The recommendations focus on meeting the growing demand for sustainable products and expanding into new markets.
- Internal clients: Desso's employees are engaged in the sustainability journey, fostering a culture of innovation and responsibility.
- Competitors: Desso's strategy aims to differentiate itself from competitors by focusing on sustainability and value creation.
- Attractiveness: The recommendations are expected to generate positive financial returns through increased market share, product differentiation, and cost optimization.
6. Conclusion
Desso has a unique opportunity to capitalize on the growing demand for sustainable products and become a global leader in the flooring industry. By implementing the recommended strategies, Desso can solidify its position as a sustainable innovator, achieve long-term growth, and create value for its stakeholders.
7. Discussion
Alternatives:
- Focusing solely on cost leadership: This could lead to a price war and erode Desso's brand value.
- Ignoring emerging markets: This would limit Desso's growth potential and miss out on significant opportunities.
- Failing to invest in innovation: This could lead to Desso becoming obsolete as competitors develop more sustainable solutions.
Risks:
- Fluctuations in raw material prices: Desso needs to implement strategies to mitigate price volatility.
- Regulatory changes: Desso must stay informed about evolving sustainability standards and adapt accordingly.
- Competition from low-cost manufacturers: Desso needs to differentiate itself through its focus on sustainability and innovation.
Key Assumptions:
- The demand for sustainable products will continue to grow.
- Desso can maintain its leadership in sustainability innovation.
- Emerging markets will offer significant growth opportunities.
8. Next Steps
- Develop a detailed implementation plan outlining timelines, milestones, and resource allocation.
- Establish key performance indicators (KPIs) to track progress and measure success.
- Communicate the strategy to stakeholders to ensure alignment and support.
- Monitor and evaluate the strategy regularly to ensure its effectiveness and make adjustments as needed.
By taking a proactive approach to sustainability, global expansion, and product innovation, Desso can secure its future as a leader in the flooring industry and contribute to a more sustainable world.
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Case Description
This is part of a case series. This case describes the strategic transformation of DESSO, a Dutch manufacturer of carpet tiles and flooring solutions. The first part of the case describes the difficult situation in which the company found itself in the early 2000s, following a series of changes in ownership. It focuses on the strategic vision developed by Stef Kranendijk, the company's new CEO, as he takes over the company in 2007. An important element of this vision is to make sustainability a key driver of DESSO's innovation strategy. The case highlights the process that led DESSO to consider a Cradle to Cradle(R) approach as well as the potential issues this new orientation raised for important stakeholders, including employees, board members, customers and suppliers. The second part of the case provides some updates as to DESSO's situation in 2010. It describes the short-term results of Kranendijk's strategic vision and how it transformed DESSO's business model. It also gives details on the implementation of the new strategy and the challenges still ahead.
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