Novozymes: cracking the emerging market code Harvard Case Solution & Analysis

Novozymes: cracking the emerging market code Case Solution

1.     How should Novozymes relate to local competitors? By competing on technological innovation only in high-margin verticals?

Novozymes is competitive enzyme producing firm from Denmark and became the major international competitor in the China. However, local competition became more intense and loyal players had acquired 18% of the Novozymes market share. Chinese enzyme producing firms hold a low-cost and high-volume strategy and were focused on acquiring maximum market share rather than profitability. However, the loyal competitors had a 50% of share in the brewing segment and had 35% market share in the textile enzyme sales.Therefore, they had been giving intense competition in the low end segments such as animal feed, textile and beverages.

In order to remain competitive, the small companies in the Chinese market outsourced enzyme production to bigger fermentation farms or some firms produced them internally by using less competent and stable technologies. In addition, local leading players installed cheaper equipments which contributed to their low cost structure whereas, Novozymes strategy build on achieving high growth through innovation and productivity improvement. It was expected that Novozymes could compete with the local players only on its technological innovations, as it used sophisticated technology and effective production processes. However, the company was facing low cost competition due to which the company was gradually under the pressure in Chinese market.Therefore, it should introduce some less expensive brands and products in order to relate with its low cost competitors.

Furthermore, the company had responded to the local players by in textile sector by developing low cost brand Suhong. It was also expanded in other segments of the company such as beverage in order to remain competitive.However, it could not maintain its position in the market by just focusing on the technological innovations.

However, Novozymes could still give a cutting edge competition to the local players in the market by developing new strategies and manufacturing practices. It should not only focus to bring technological innovations in only single segment but it should also focus on the other segments of the market in order to remain competitive in other segments too. Furthermore, it should also focus on the other manufacturing and production practices together with increasing its product’s range and customer’s segments.

Moreover, it should also explore the other unprofitable market segments such as brewing in order to make its roots stronger in such areas. The company should focus on the brewing segment by maintaining the quality with low price strategy. As it seems that Suhong is not sufficient in expanding the market share therefore, the company should enhance its quality by slightly increase in its price, as this will allow the company to capture the higher end customers such as large mills that would increase the market share and profitability. Therefore, the company should also increase its customer segments by targeting higher end customers with high prices. Hence by targeting both the higher and lower market segment with improved quality would enable the company to compete with the local Chinese firms.

2.     Should Novozymes create a separate subsidiary with a new low-cost business model for commoditized verticals?

Developing a new independent company with completely new business model alternative seems realistic and rational for Novozymes in such intense circumstances. The company should focus on the entire verticals supposed commoditized together with the price receptive, segments which would increase the likelihood to increase the company’s market share and sales volume. This business model would also help the company to change its cost structure which in turn would compete against the low cost firms of the China...................

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