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Coloplast AS

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Coloplast Case
Executive Summary
Coloplast has been in operations in Denmark for nearly 60 years. The company specializes in producing medical devices such as disposable ostomy bags, antifungal cremes cleansers and moisturizers. For 42 years, all Coloplast operations were contained within Denmark, however 97% of its revenue was generated by exporting its products beyond its national borders. In 1999 the company changed its philosophy and began to investigate off shoring its production facilities. In 2001 the first Coloplast production facility opened its doors outside of Denmark. The expansion took place in Tatabanya Hungary. This location was chosen because of cheaper labour and land rates, as well as a more favourable tax rate. The
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Internal estimates indicate that by 2010 the company will require double its current product volumes. At the same time they have set aggressive profit margin and growth goals. The international production expansion strategy is an important part of its goals. Coloplost hopes to meet the growing demand of its customers and achieving revenue goals by expanding production facilities in countries with lower operating costs
One of the lessons learned by Coloplost after the expansion in Hungary is the importance of the transfer of knowledge and communication between all segments of the business. This area needs to be improved prior to further expansion to China. During the last expansion management was so busy dealing with communication issues that they failed to fully take advantage of local sourcing opportunities, instead importing more expensive options.
Management in Denmark must also decide how to properly utilize their domestic workforce, when many of their current production positions are shifting to new countries. This will be a very important decision as these employees hold a high level of tacit knowledge of the company that it does not want to lose.
The reporting of sales/conversion back to Danish currency represented a 2% loss. Continued expansion into new markets in both production and sales will make this issue even larger then it currently is.
It is in the companies best interest to retain its Danish workforce when
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