Harvard Case - Wilo SE: Corporate structures in times of deglobalization
"Wilo SE: Corporate structures in times of deglobalization" Harvard business case study is written by Claire Cardy, Bianca Schmitz, Olaf Ploetner, Johannes Habel. It deals with the challenges in the field of Strategy. The case study is 7 page(s) long and it was first published on : Mar 8, 2022
At Fern Fort University, we recommend that Wilo SE adopt a hybrid corporate structure that leverages its global presence while adapting to the emerging deglobalization trend. This structure will prioritize regional autonomy, fostering local innovation and responsiveness, while maintaining centralized control over core competencies like technology and sustainability. This approach will enable Wilo to navigate geopolitical complexities, capitalize on emerging market opportunities, and maintain its competitive advantage in the global pump industry.
2. Background
Wilo SE, a German pump manufacturer, faces a complex challenge: navigating the evolving global landscape characterized by deglobalization, rising nationalism, and trade tensions. The company, with a strong international presence, needs to adapt its corporate structure to maintain profitability and growth in a more fragmented world.
The case study highlights Wilo's existing structure, characterized by a centralized headquarters in Germany and regional subsidiaries responsible for local operations. This model has served the company well in a globalized world, but the emergence of deglobalization trends necessitates a more flexible and adaptable approach.
3. Analysis of the Case Study
To analyze Wilo's situation, we utilize several frameworks:
1. Porter's Five Forces:
- Threat of New Entrants: The pump industry is relatively mature, with high barriers to entry due to technological complexity and economies of scale. However, disruptive innovation from startups and emerging markets poses a threat.
- Bargaining Power of Buyers: Buyers have moderate bargaining power, influenced by the availability of substitutes and the concentration of large customers.
- Bargaining Power of Suppliers: Wilo's suppliers have moderate bargaining power, depending on the availability of raw materials and specialized components.
- Threat of Substitutes: The threat of substitutes is moderate, with alternative technologies like solar-powered pumps emerging.
- Competitive Rivalry: The industry is characterized by intense competition, with established players like Grundfos and Ebara vying for market share.
2. SWOT Analysis:
- Strengths: Strong brand reputation, technological expertise, global presence, commitment to sustainability.
- Weaknesses: Centralized decision-making, potential for bureaucratic inefficiencies, vulnerability to geopolitical risks.
- Opportunities: Expanding into emerging markets, developing innovative products and services, leveraging digital transformation.
- Threats: Deglobalization, trade wars, rising nationalism, technological disruption.
3. Value Chain Analysis:
Wilo's value chain encompasses:
- Inbound Logistics: Sourcing of raw materials and components.
- Operations: Manufacturing and assembly of pumps.
- Outbound Logistics: Distribution and delivery of products.
- Marketing and Sales: Promotion and sales of pumps.
- Customer Service: After-sales support and maintenance.
- Research & Development: Innovation and product development.
4. Business Model Innovation:
Wilo can explore business model innovation by:
- Developing subscription-based services: Offering maintenance contracts and remote monitoring for pumps.
- Expanding into new markets: Targeting emerging markets with customized solutions and tailored products.
- Leveraging digital platforms: Creating online marketplaces for pump sales and services.
4. Recommendations
1. Hybrid Corporate Structure:
- Regional Autonomy: Grant greater autonomy to regional subsidiaries, empowering them to make local decisions regarding product development, marketing, and pricing.
- Centralized Core Competencies: Maintain centralized control over core functions like research and development, technology, sustainability, and brand management.
- Stronger Regional Leadership: Develop strong regional leadership teams with the expertise and autonomy to navigate local challenges.
2. Strategic Partnerships:
- Emerging Market Collaborations: Partner with local companies in emerging markets to gain access to distribution networks and market knowledge.
- Technology Alliances: Collaborate with technology companies to develop innovative solutions and integrate digital technologies into products and services.
3. Digital Transformation:
- Data Analytics: Leverage data analytics to optimize production processes, improve customer service, and personalize marketing campaigns.
- E-commerce Platform: Develop a robust e-commerce platform to enhance customer experience and expand online sales channels.
- Internet of Things (IoT): Integrate IoT technologies into pumps to enable remote monitoring, predictive maintenance, and data-driven insights.
4. Sustainability Focus:
- Green Product Development: Develop energy-efficient and environmentally friendly pumps to meet growing demand for sustainable solutions.
- Circular Economy Principles: Implement circular economy principles in production and logistics to reduce waste and minimize environmental impact.
- Transparent Sustainability Reporting: Provide transparent and comprehensive sustainability reporting to build trust with stakeholders.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies: The recommendations leverage Wilo's core competencies in technology, sustainability, and brand reputation while adapting to changing market dynamics.
- External Customers: The recommendations prioritize customer needs by offering customized solutions, improved service, and digital convenience.
- Internal Clients: The recommendations empower regional teams, fostering innovation and responsiveness, while maintaining centralized control over strategic functions.
- Competitors: The recommendations aim to maintain Wilo's competitive advantage by embracing digital transformation, developing innovative products, and expanding into new markets.
- Attractiveness: The recommendations are expected to enhance profitability and growth through increased market share, reduced costs, and improved efficiency.
6. Conclusion
By adopting a hybrid corporate structure, fostering strategic partnerships, embracing digital transformation, and prioritizing sustainability, Wilo SE can navigate the challenges of deglobalization and emerge as a leader in the global pump industry. This approach will enable the company to capitalize on emerging market opportunities, maintain its competitive advantage, and achieve long-term success.
7. Discussion
Alternatives:
- Complete Decentralization: This approach could lead to a loss of control over core competencies and brand consistency.
- Maintaining Existing Structure: This would likely lead to inefficiencies and a lack of responsiveness to local market conditions.
Risks:
- Increased Costs: Implementing a hybrid structure and digital transformation initiatives may require significant investments.
- Cultural Challenges: Integrating regional teams and fostering a unified corporate culture may require careful management.
- Technological Disruption: Emerging technologies could disrupt the pump industry, requiring constant adaptation and innovation.
Key Assumptions:
- The deglobalization trend will continue, creating opportunities for regional players.
- Emerging markets will offer significant growth potential for the pump industry.
- Wilo's core competencies will remain relevant and competitive in the future.
8. Next Steps
- Pilot Program: Implement a pilot program in selected regions to test the hybrid structure and digital transformation initiatives.
- Leadership Development: Invest in leadership development programs to equip regional teams with the necessary skills and autonomy.
- Strategic Partnerships: Identify and establish strategic partnerships with key players in emerging markets and technology sectors.
- Continuous Monitoring: Regularly monitor the effectiveness of the new structure and adapt strategies as needed.
By taking these steps, Wilo SE can successfully navigate the complexities of deglobalization and position itself for continued growth and success in the global pump industry.
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Case Description
Wilo SE, headquartered in Dortmund, Germany, was a leading supplier of pumps and pump systems for the building services, water management and industrial sectors, which was doing business in more than 50countries. Based on current global developments in politics, economy, and society, Oliver Hermes, President and CEO of Wilo Group, saw a de-coupling of three tectonic plates centered in China, USA, and Western Europe. At the Wilo management conference in September 2020 Hermes informed stakeholders about the decision to establish a 2nd headquarters in Beijing within the next few months, and possibly to open a 3rdheadquarters in the following year in the USA. He stated: "With the opening of a 2nd headquarters I want to set a sign. Wilo has to keep up with current global developments - whether we like them or not. A stronger regionalization of Wilo is necessary to continue our global success." The case text introduces the key measures to establish the 2nd headquarters in China.
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