Strategy and Analysis of Danaher Corporation
As the case explains, economic changes are a big concern for Danaher’s success. The following topics will be analyzed in addressing those concerns: Business-Level Strategy, Corporate-Level Strategy, External Analysis, Internal Analysis, Recommendations. Business Level Strategy Danaher uses mainly a Cost Leader Strategy with a few qualities of Product Differentiation. Details of this can be found by looking at their DBS system. The system is designed to increase productivity and reduce costs. This gives them a learning curve and technological advantage. We will further discuss each of these advantages.
The Learning Curve advantage is very valuable to the Danaher Corporation. The DBS was created based on the study of Toyota’s lean manufacturing process. The DBS system has been in use since 1988, but has been added to along the way. They have created and modified this system for not only continuous improvement, but also a system for implementing changes and operation of their corporation. This is what gives it its rarity and makes it costly to imitate. The learning curve is a form a temporary competitive advantage, because it can at some point be imitated.
Even with the right technological system in play, what makes Danaher stand out is their technological advantage, especially their software. Their management teams are put through trainings, what they refer to as “boot camps”. These training courses for their employees, along with the tools that allow each level of the corporation to make improvements, create great relationships between labor and management. This empowers the employees with the know-how to get things done more efficiently. This adds tremendous value, and is rare and not seen in many corporations. This type of dedication to training is very costly to imitate.
This has allowed them a sustained competitive advantage through the years. Corporate-Level Strategy Danaher Corporation uses the Merger and Acquisitions and a Diversification corporate level strategies. They have been identified as using a conglomerate merger strategy. Since their creation they have been acquiring other firms to further expand their business. They were not so much interested in vertical integrations, but in seemingly unrelated diversification. Their strategy for this has been to identify companies with growth rates between five and seven percent, along with other criteria. By imiting the growth size they were able to acquire large enough companies to be worth their time, but small enough companies to allow for great improvements and implementation of their DBS process. This strategy allowed them to reach economies of scale in their new company partly by their shared activities. This is what gave their strategy real value. They wanted room to improve the companies. They did not attempt to take over the biggest companies, like many corporations have done. They typically aimed for companies in a segmented market, allowing them to consolidate the market. This gave this strategy the rarity for a competitive advantage.
Their strategy has become costly to imitate because of their history and success with implementing their DBS in their corporate strategies. External Analysis One of the main threats to Danaher Corporation is the Threat of Rivalry. The private equity firms have been adopting the conglomerate merger strategy quite rapidly. The appeal of this strategy has opened the doors for the private equity firms and increased the threats of new entrants and rivalry. This increase in threats has made it very difficult for corporations to compete and survive with this type of strategy, because of the aggressiveness of the private equity firms.
Danaher Corporation has to recognize this threat and make the appropriate changes. Even though these threats can be harmful to a corporation, it can also become an opportunity for them as well. Danaher is faced with the options of increasing the number of acquisitions, making larger acquisitions, or simply selling out to the private equity firms. These options also give Danaher the chance to adjust their strategy and to focus on the competitive advantages they have gained over their competitors. Most of their competitors do not have the organization and systems in place to maximize their profits. Internal Analysis
One of Danaher’s biggest strengths is their DBS. The DBS has been the core of their operating model and acquisition strategy. This system has been with the company for over 20 years and has been perfected along the way. This has given them a sustained competitive advantage with both business-Level and Corporate-Level strategies. As explained above, this system is rare and costly to imitate. Not only that, but they have the organizational structure to use this strength to their advantage. Continuous improvement has been a strength, but seems to be losing the competitive advantage as the limitations to improvements are achieved.
Recommendations * Shift to a more product differentiation strategy by focusing on Danaher’s reputation and linkages between firms. This shift will separate Danaher as the leader in the declining industry. * Decrease the threats of rivalry and new entrants into the market by divesting their underperformed companies. The increase in cash flow will allow for more growth through rapid acquisitions. * Focus on reducing operating costs by expanding the shared activities between companies within the corporation.
