Dansk Designs, Ltd.

Dansk Designs, Ltd.

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Dansk Designs Ltd., founded in 1955, is a company that markets stainless steel flatware. The firm traditionally followed a strategy of differentiation. They produce high quality products for the “top of the table”. Their goal was to reach a small market segment, which consisted of upper class, prestigious customers. Dansk Designs wanted to sell the concept of the Dansk brand, and believed their consumers would purchase the Dansk products because of the prominent brand name and because the products were the very best in taste and quality. Ted Nierenberg, the founder of Dansk Designs has recently decided that he wants to keep Dansk growing at 15% to 20% per year. Nierenberg feels as if his current product line will not provide sufficient growth to meet his objectives, and believes it is in the company’s best interest to introduce a new line of house ware products called Dansk Gourmet Designs Ltd. Nierenberg believes they should market this new line to a much wider group of consumers at competitive prices. However, I believe that although expanding into a new market with a new product line will increase short-term revenues, in the long run it will be detrimental because the new line will dilute the brand identity of Dansk Designs. If Nierenberg wants to grow every year 15% to 20%, I believe he should consider ways to lower costs instead of increasing volume and revenues.
     Traditionally, Dansk Designs followed a strategy of differentiation. When a firm follows this strategy, they create differences in the firm’s product or service by creating something that is perceived as unique and valued by customers. Differentiation can take many forms, including prestige or brand image, which Dansk decided to implement. Their product line consists of eight product categories, which include flatware, china, linen, glass, decorator cookware, and wooden bowls and trays. Their products are of high quality and are highly priced. Dansk was able to achieve a differentiation advantage because their price premiums exceeded the extra costs of being unique. Dansk is able to create these unique products because of the talented designers they employ, including Jens Quisrgaard, Niels Refsgaard, and Gunnar Cyren. Another competitive advantage of a strategy of differentiation is the ability to deal with supplier power. There is a certain amount of status associated with being the supplier to a producer of differentiated products. Dansk’s principal supplier, Richard Nissen, has enjoyed working with Dansk because he believes they have been able to “preserve the handcrafted nature of the products”.

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Nissen does not have goals to expand for price. He commented, “I don’t want to be big in volume. I would like to be large in quality.” Therefore, with Dansk’s traditional strategy they definitely have supplier power. As well, with the strategy of differentiation, Dansk has been able to enjoy high customer loyalty. Nierenberg referred to the consumers as “Dansk club members”. In 1970, about 50,000 people wrote to Dansk requesting information on products. The high customer loyalty has allowed Dansk to appreciate less threat from competition. Therefore, Dansk’s strategy of producing high quality products for a small market segment of high-class consumers, has allowed them to take a position in the market where they can enjoy high consumer loyalty, supplier power, and high profits because of their prestigious brand identification.
     Dansk is in a very good position in the market. A competitor has recently commented, “They set their goals and they follow them: the top of the table, good design, good taste, and good advertising. They are in a very good, secure spot and a remarkable position today. However, Nierenberg believes that to reach his goal of growing 15% to 20% per year he should expand his product line to reach a new market with competitive prices. Dansk Gourmet has developed 35-40 new product categories. They are planning on mass-producing house ware so they will be able to competitively price their products and reach a new market segment. Dansk is planning on moving out of isolated departments like china and crystal and into new, higher traffic areas. However, I believe that the intended introduction of the new gourmet line is a terrible idea for Dansk Designs. Dansk has prided itself as a high quality, high-status producer of stainless steel flatware, and I think if they expand their product line to include lower quality products at lower prices they will harm their brand identification. A firm that strategically positions itself with differentiation can damage their brand image by adding products with lower prices and less quality. Even though expanding will probably cause sales for Dansk to skyrocket because many middle to lower class consumers will purchase the new products, their profits will decrease in the future because their original consumer market will most likely decrease their purchases because of the tarnished image of the high quality brand. Since the higher quality products could be priced higher, they brought in a high amount of profit to the company. If Dansk loses their higher-class consumers, their profits are going to decrease dramatically. Therefore, I believe it is in Nierenberg best interest to improve the management of his company to decrease costs. If he is able to substantially decrease costs, he will be able to reach his goal of growing 15% to 20% a year without increasing volume.
     My strategic recommendation for Ted Nierenberg is to implement a combination strategy of integrating overall low cost and differentiation. Ted has already accomplished the differentiation segment of the strategy, now he just has to implement the lower cost segment to be able to gain a higher profit margin. Ted will be able to provide unique products to his customers in an efficient manner. I do not think that Ted should necessarily lower its prices of its products because this will damage its prestigious brand image. I think that Ted should concentrate on lowering his production costs. To do this Ted has to improve the management of Dansk Designs and the production of their products. The first thing that I believe Nierenberg should due is develop an organizational chart. As of now, his company is very informal and the atmosphere is open. I believe it is good to have a relaxed atmosphere, but I believe an organizational chart it needed. This way the company will be more organized and all the employees will know their specific job descriptions and whom they should report to. However, I believe the relaxed atmosphere is good because it creates an enjoyable place to work. As well, Ted should create his own manufacturing operations. Right now contract manufacturers make all of his products, and Dansk provides all the tools and designs. This creates a high cost production of the flatware. Also, Dansk found that many of the sales of its products were constrained because of the capacity of the contract manufacturers. If Dansk had its own manufacturing they would be able to save a lot of money in productions costs, and produce the amount of products that they need. As well, I believe Dansk should invent machinery that can create the products cheaper and maybe even better than the craftsmen. Another way in which Dansk is spending a lot of money is on their many different offices and the geographic location of these offices. The headquarters building in Mt. Kisco, New York is a remarkable building on six acres of land. In addition to the Mt. Kisco headquarters, Dansk also has the Copenhagen office and the Paris production supervision office. The distant locations of all the offices are creating communication problems. The Telex bills are extremely high. Also, employees are spending a lot of time writing letters back and forth, and this time should be spent on more important issues. Therefore, Dansk is losing money because of communication costs and the lost time spent writing letters. As well as bring the offices closer together to decrease communication costs, Dansk should downgrade their offices. I do not think it is necessary to have such enormous offices. I think that if Niernenberg improves the management of his company and the production of his products he will be able to produce his products in a more efficient manner.
     Dansk Designs has positioned itself in a strategy of differentiation. This strategy has worked very well for them and they have become extremely profitable. However, I agree with Ted that if he wants the company to grow at 15% to 20% a year some changes are going to have to be made. I do not think that expanding into another market segment is the best way to compete strategically in the industry. If Dansk expands, it may grow at this rate for the first couple of years, but I think the introduction of the new lower priced products will dull Dansk Designs strong brand image. With a different brand image, I think that Dansk is going to lose their upper class consumer market. Therefore, I think it is in Dansk’s best interest to lower its production costs. With lower production costs, Dansk will have a higher profit margin. And if the costs are managed in the most efficient manner, than I believe Dansk will be able to achieve its goal of growing 15% to 20% per year.
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