Coloplast a/S Organization Challenges in Off-Shoring Essay

2500 Words Aug 4th, 2009 10 Pages
Coloplast A/S organization challenges in off-shoring

Houssam Khawajkyia

Friday, July 18, 2009

Executive summary

Coloplast, an international company which specializes in developing, manufacturing, and marketing medical devices, implemented an off-shoring strategy in order to be different, stay competitive and meet the dynamic market needs. In implementing this strategy, Coloplast had several issues and the first was the organizational structure. Due to changes in the organizational structure of its Danish and Hungarian production plants, misunderstandings arose between employees which resulted in serious of organizational and managerial challenges. However, the management resolved these differences through
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Local sourcing When setting up the Hungarian production units, most of the emphasis had been on streamlining the production processes, and this consumed huge managerial resources. This led to the neglect of other available opportunities which could have been taken advantage of, such as local sourcing of materials and machines. For instance, the granulate material which Coloplast uses in production was sourced from its branch in Denmark. Coloplast Denmark had purchased it from suppliers in Germany who had in turn bought it from a producer in Hungary. Coloplast would have saved over 60% of the cost had it bought the material directly from the supplier in Hungary due to the addition of profit margins at each stage. This instance provided Coloplast with future lessons on the importance of local sourcing when off-shoring.
Analysis of issues

Organizational structure The organizational structure is essential and a very important component in achieving the defined goals of any organization. It considered as a backbone and framework of formal and informal lines of rules of which determine how decision making will be done as well as the command structure of the organization. There are two types of structures; centralized and decentralized structures (see figure 1). According to Omachonu and Ross (2004), one major advantage of a

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