DENMARK AS A HIGHLY COMPETITIVE INDUSTRIAL NATION
“Denmark Limited – Global by Design” describes Danish companies which have become world leaders in their own area. The book has a number of introductory chapters of a more general character. This one is written by Hans Skov Christensen, CEO, Director General of the Confederation of Danish Industries.
Hans Skov Christensen
WHY HAS DENMARK FOSTERED SO MANY INDUSTRIAL CHAMPIONS?
“It is typically Danish to ask what is typically Danish”, the Danish writer, Elsa Gress, once said. Nevertheless, in the autumn of 2005, the Confederation of Danish Industries invited 100 foreign businessmen and diplomats to its Annual Conference to debate the Danish mindset and how Danes are distinguishable from other nationalities.
Don’t just be nice – be inspired – was the main message from the 100 foreign guests. The message was basically a call for Danes not just to travel the world but to be inspired by the surrounding world and by foreigners and to dare to change attitude and habits.
A global outlook is an important prerequisite for Denmark. Some 712,000 Danes, or more than 40 per cent of the total private workforce, are employed directly or indirectly because of exports. From that perspective, it is not surprising that four-fifths of Danish companies consider globalisation as something positive which increases opportunities.
COMPETITIVE EXPORTS THROUGH INNOVATION AND KNOWLEDGE
It is well known that the bumble bee can only fly because it doesn’t know that it can. This picture has recently been used when economists speculate on how Denmark has managed to ride on a wave of high competitiveness while large parts of Europe struggle to keep up the pace.
Danish companies prove competitive despite the fact that a number of new emerging markets – principally in Eastern Europe and South East Asia – enjoy considerably lower costs than Denmark. Danish companies have partly compensated for their high cost levels by being highly productive, thus ensuring that goods produced in Denmark do not grow too expensive. However, the phenomenon also proves that competitiveness is not just a question of production price but certainly has a quality aspect.
By making products of a higher level of refinement and finish, Danish companies can fill lucrative niches in the export markets by integrating more knowledge into the products through high quality, commitment to design, branding, service, customisation and constant innovation and renewal of export products. Doing so makes Danish products capable of achieving high prices in the world market compared with those of competitors.
Products that can be sold at higher prices than competing products are referred to as upmarket products. They are aimed at customers who are willing to pay a higher price for a quality product rather than purchasing a lower quality rival product at a lower price.
This is a strategy chosen by the major part of Danish export companies as about 40 per cent of Danish export goods consists of upmarket products –here defined as export products which are at least 15 per cent more expensive than similar products in the European Union. In this regard, the Danish pharmaceutical industry is a forerunner with more than 90 per cent of its products being upmarket. By comparison, only 35-40 per cent of Germany’s and France’s pharmaceutical exports are upmarket. And the trend has been rising since the end of the 1980s. This places Denmark a handsome fourth in the quality hierarchy of the EU. Commitment to upmarket products is of course not the sole opportunity available to Danish companies. However, in the age of globalisation, the aspect of balancing quality with price becomes increasingly important.
UTILISING THE INTERNATIONAL DIVISION OF LABOUR
Every generation in history has its adventurers. When the young Marco Polo in 1271 decided to explore the world and head for uncharted territories in China, he discovered and fell in love with a proud culture and realised that Europe was not alone in the world. When he returned to Venice, he opened the eyes of European traders and exporters with his tales of a world far away and thereby planted the first seed for the development that we have recently named “Globalisation.” Globalisation has opened access to far corners of the world and in recent years, many Danish companies have moved from being national to global. Company focus is moving from international sales to global optimisation of the value chain, and Danish companies increasingly locate individual parts of the value chain where it is most profitable. Advances in transport and communication technology enable companies to outsource parts of the value chain to other parts of the world, and thereby sharpen their competitive edge to get access to special skills or simply to get closer to new markets.
Physical borders and distances are less important to global production networks. The international division of labour is growing not only across national borders but also across industries. For example, outsourcing of service tasks, transport tasks or complex tasks in IT or administration is today a natural part of company activities.
HIGH LABOUR MARKET FLEXIBILITY
Denmark’s flexible employment regulations in collective agreements and labour legislation make it easy for companies to adjust to changing conditions and thus less risky to hire new staff. This has created a very dynamic labour market. Each year, 800,000 Danes, or one out of three, change to another job, some 250,000 Danish jobs are eliminated and around 260,000 new ones are created.
The high degree of flexibility entailed by labour market institutions concentrating on job creation rather than job protection does not make employees feel particularly anxious about their employment situation. On the contrary, Danish employees are among those in Europe who show the strongest feeling of job security.
ADAPTATION IS THE KEYWORD
Marco Polo spent 3 1/2 years’ travelling before he reached the town of Cambaluc, which later became known as Beijing. He would never have imagined that some day, the journey could be done by plane in just a few hours whilst chatting with customers on the internet on the way there.
The limited size of the Danish market has encouraged Danish companies to be a new generation of Danish Marco Polos who eagerly look for new territories to explore. And they are proving to be capable and creative explorers.
The keywords for success are global outlook and adaptability. The companies that are most successful see change as an opportunity and not as a threat.
Every process of change requires seizing new opportunities. This underlines that the winning strategy is dynamic. Countries or companies that are not constantly aware of adapting to the more and more rapidly changing business climate will soon find themselves on a downhill slide. Or put differently: in the global economy, the distance between success and failure has decreased.
Had Elsa Gress been alive today, she would have had noticed at least one thing that is typically Danish: the nation’s companies are global oriented and specialized. Or maybe even truer: specialization and global orientation are prerequisites for Danish companies to be successful.
This page forms part of the publication 'FOCUS Denmark' as chapter 4 of 23
Version 1. 22-05-2007
Publication may be found at the address http://www.netpublikationer.dk/um/7889/index.htm