Tuesday, May 08, 2007

Danobat Group Visit April 27, 2007 Elgoibar

As a part of my Masters program we visited the Machine Tool Coop Danobat, and meet with the President Jesus Mari Astigarraga. Danobat is in the machine tool division of MCC. The Danobat Group is actually made up of eight independent Machine-Tool Coops from MCC. Each of the coops in the Danobat Group is specialized in a distinct area of M-T manufacturing: they include grinding machines, milling machines and centers, lathes, saws and cutting machines, punching and folding machines, and machine centers as well as offering re-engineering of machines. While all of the companies in the Danobat Group cooperate closely, each coop is an independent entity with its own management and decision-making abilities and cooperative ownership structure. They have voluntarily joined together to have a stronger brand name, to share technology and know-how, to be able internationalize, take advantage of economies of scale and to develop new products and businesses. The coops coordinate production to avoid competing with each other and offer a wider range of products as well as supporting their own innovation center center. In all Danobat´s sales in 2006 totaled nearly $200 million, 75% of which were international.

Danobat’s innovation center, Ideko, is key to the competitiveness of the business. It has more then 80 staff, plus a high degree of interaction with the technology departments of each coop in the group. The goal of Ideko is not only improve the existing products of Danobat, but to help in the development of new products and new businesses. Last year Danobat invested more than $10 million in Ideko.

In order to recuperate the high costs of R+D, Danobat has had to make a huge effort to internationalize its sales. In the last few years sales in Spain and in Western Europe have continued to decline as a percentage of overall sales. This is due to the growth in Eatern European and Asian markets. Internationalization is also necessary to remain competitive, to maintain market share and to continue creating jobs. Danobat has had a plant in China since 1990 and has since expanded to England, Germany and Croatia and is contemplating opening installations in India and the US. While it has done some international expansion in terms of production, most of its foreign installations are services or supply oriented in nature. Danobat, like nearly all companies in MCC, has a strong commitment to maintaining and creating employment in it home environment. International expansion is always viewed as strengthening the home business. The goal is not to move jobs offshore to cut costs, but to create or maintain employment at home. In fact, Danobat has been the only M-T producer in Europe in the last decade to maintain employment level. While elsewhere it has declined dramatically, the strategy for Danobat has been to look for markets abroad, in emerging markets and in Europe and most importantly look for niches to differentiate itself from the competition.

Danobat´s strategy to remain competitive should be looked at in the context of the increasing competitiveness of the sector. In general it is a the Machine-Tool sector made difficult by two factors: the presence of huge manufacturers which may have 30,000 or 40,000 employees and increasingly of low-cost, emerging companies that may be relatively small, but more and more produce quality products. In order to survive this dual competition, Danobat’s competitive edge lies in its ability to find niche markets. As a whole the group is relatively small about 1,000 workers, so it must find opportunities that are small enough to be overlooked by large firms, but at the same time technologically demanding or where quality, service and the ability to transfer know-how to customers is desirable and allows them differentiate themselves from low-cost competitors. In general, investing in advanced technology is a solution to the problem of competitiveness, but it is not sufficient, Danobat must look for niches, service, quality, getting close to customers, physically and in terms of providing solutions tailored to their needs. Its most important customers include the aerospace industry,

In the last 5 years it has also acquired several businesses abroad, one in Germany and one in England, to add technical capability, but also to have servicing capability in important markets, as well as to be able to sell products with a German brand name. While the size of these companies is very small acquiring them has afforded them important entries into new markets.

The Machine Tool sector has another peculiarity, which is the clock-like nature of its downturns, virtually ever ten years. Part of Danobat´s strategy has been to build long-term solutions for weathering the cyclical ups and downs. This has included new businesses outside of Machine Tool sector and an emphasis on servicing and reengineering machinery. In addition the diversification of business activities is key to long-term job creation and to being able to weather downturns of the sector. In 2005 Danobat Group founded a new cooperative, DanoRail, a company which provides maintenance systems for Railroad companies. It is a business that includes machines as well as other services, although it is a different sector, it utilizes the technical expertise of Danobat in way that expands the business to new areas. This came out of an ideas circle with researcher, MMC managers and Danobat Managers who are focused on creating new businesses that allow them to diversify while utilizing existing or related know-how.

It should be remembered that the Danobat group is made up of eight different companies (the plants abroad are joint ventures of all of the coops in the group) that have there on identities and agendas. But they do cooperate in other ways as well, namely in sharing of profits. At the end of the each year about 40% of all profits from each company are pooled together and distributed based on the size and or losses of each company. In this more successful companies support struggling companies, although all have been though periods of weakness and prosperity. This is a common trait with in all of the industrial divisions of MCC. This is another fact that allows the group to survival downturns.
In 1991 the Machine Tool Institute (located in the same town www.imh.es) was founded in part by Danobat to provide trained personal for the Machine Tool sector and to act as an Innovation Center, which promotes technological dissemination. It provides continuous training as well as, technical degrees, engineering degrees and short training modules. It maintains close contact with the companies in the M-T sector.

1 comment:

Brandie said...

Interesting to know.