Table of Content

1 Introduction.......................................................................................................................................3

2 Problem Formulation.........................................................................................................................4

.............................................................................................................................................................5

3 Analysis.............................................................................................................................................6

3.1 Macro-Environment....................................................................................................................6

3.1.1 Scenarios .............................................................................................................................7

3.2 Meso-Environment.....................................................................................................................9

3.3 Micro-Environment..................................................................................................................12

3.3.1 External..............................................................................................................................12

3.3.2 Expectations & Purpose.....................................................................................................14

3.3.3 Internal...............................................................................................................................17

3.3.4 Strategic Position...............................................................................................................21

4 Strategic Choices.............................................................................................................................23

4.1 SBU Strategy............................................................................................................................23

4.2 Portfolio Evaluation..................................................................................................................25

4.3 Strategic Development..............................................................................................................26

4.4 International Strategy................................................................................................................27

5 Implementation................................................................................................................................30

5.1 Configuration............................................................................................................................30

5.2 Resourcing Strategies...............................................................................................................33

5.3 Change Management................................................................................................................36

5.3.1 Diagnosing the Change Situation.......................................................................................36

5.3.2 Coping with Strategic Changes..........................................................................................37

6 Conclusion ......................................................................................................................................39

1
7 Literature List..................................................................................................................................42

8 Appendix.........................................................................................................................................44

2
1 Introduction
JBS Undertøjet A/S was founded in 1939 by Jens Bjerg Sørensen in Herning, Denmark. Today the
company is the largest and leading producer of underwear in Denmark. In addition to producing
underwear, it also produces socks and related accessories such as bathrobes. It is a family owned
company with an international workforce of approximately 300 employees.1 JBS is represented in
more than 500 shops in Denmark2 and has a brand awareness percentage on 90 on the Danish
market.3 JBS’s primary markets are in the northern European - primarily Denmark, The
Netherlands, Norway and Germany. Additionally the company is also represented in Canada and
England.4
JBS produces approximately 5 million pieces of underwear etc. per year, half of which is produced
by the subsidiary in Lithuania while the other half is produced by a Turkish supplier. 5 The
headquarters in Herning, Denmark is handling the administration and storage facilities.6

JBS’s turnover has been steadily rising during the latest 20 years7 up until the period 2005-06 where
the turnover was 166 million DKK and the earnings before tax was 27 million DKK. However in
the fiscal period 2006-07 the turnover was decreased to 159.6 million DKK. This was attributed to
the private-label segments where companies buying underwear customized with their own company
logo e.g. chose to import the products from China due to the low dollar exchange rate. Therefore the
lower result was not due to a decline in JBS’s own label products. The earnings before tax also
declined in the 2006-07 fiscal year to 19.4 million DKK due to moving the production to and
expanding the factory in the Lithuanian subsidiary.8 The earnings before tax declined further in the
2007-08 fiscal year to 14.2 million DKK.9

1
JBS Company Profile
2
Danish Ministry of Education (2008)
3
B2C Superbrands (2006)
4
JBS Company Profile
5
Danish Ministry of Education (2008)
6
A. Sandal, G. Søndergaard, P. Risegaard & V. Krøyer, (2008) p. 7
7
B2C Superbrands (2006)
8
Brancheorganisationen Dansk Textil & Beklædning (2008)
9
JBS Annual report 2007/2008, p. 18

3
2 Problem Formulation
The following questions will be answered in the report:

• What is the strategic position of JBS?

o How is JBS’s strategy influenced by the macro-, meso- and micro-environment?
o Who has expectations to JBS?
o What is the purpose of JBS?
o What strategic capabilities does JBS possess?

• What strategic choices should be made?

o What should the SBU’s strategies be?
o How should JBS develop?
o How should JBS act internationally?

• How should JBS implement the strategic changes?

o How should the configuration of JBS be organized?

o How should JBS manage its resourcing strategies?

o How is JBS to cope with the management of change?

In the following an overview of how this report will be solved is given:

The assignment is divided into three main parts, where one part creates the foundation for the next.
The three parts are analysis, strategic choices and implementation. Each of these parts is further
divided, and in the model it is further outlined which theories/models have been used. In the model
the content of each part is written in bold and theories/models applied are written in italic.

4
5
3 Analysis
In this chapter JBS’s strategic position will be analyzed. It will include an analysis of the
environment on the macro-, meso- and micro-level.

3.1 Macro-Environment
To analyze JBS’s macro-environment, the PESTEL framework will be applied. It gives a wide
overview of which factors JBS should pay attention to since changes in these factors could
influence the strategy of JBS. In the table below, the results of the PESTEL analysis is illustrated:

Figure 1: PESTEL Analysis of JBS (own construction)

The political environment can have a strong influence on the strategy of JBS if foreign trade
regulations are changed. Since JBS imports fabrics from China, restrictions in import quotas or
increased tariffs can force the company to change its production strategy. Such a change can mean
that JBS also has to accept higher production costs and change in its general strategy.

6
It is assessed that “restrictions in foreign trade” is a key driver for change. Another political aspect
that can have an influence is the laws regarding income taxes. Higher income tax results in lower
disposable income, which could lead to consumers would preferring lower priced underwear.

An aspect in the social environment that JBS should pay attention to is the change in consumer
lifestyles e.g. what is the trend in the underwear industry in terms of fashion, taste and behavior
among its target groups? It is the opinion that “lifestyle changes” is also a key driver for change for
JBS.

It is assessed that protection laws and waste disposal in the environmental environment can be key
drivers for change. Not only JBS’s production in Lithuania, but also the upstream suppliers in
China might face more strict environmental regulations. This can be chemicals used for bleaching
or softening of the textile that get prohibited. It can also be regulations concerning waste disposal
that gets more restricted and/or the prices for the disposal increases. Thereby there is some risk of
increased prices or in worst case even an import embargo.

JBS’s business is not highly dependent on technological developments; however one potential
threat could be new technological discoveries or developments in relation to preparation of fabrics.
It could have an influence on JBS’s strategy and the obsolescence rate if more durable fabric was
invented.

Among the factors in the economic environment that can influence JBS are the business cycle,
inflation rate, unemployment, interest rate and disposable income as mentioned before. All of these
macroeconomic factors influence JBS’s potential for sales and investment, and are therefore factors
that the company should consider when designing its strategy.

Legal factors that could have influence on JBS’s strategy could be employment laws e.g. if the
minimum wage at its subsidiary in Lithuania is increased, it is likely to have an influence on the
production costs.

3.1.1 Scenarios
As it can be seen from figure 1 four possible key drivers for change have been identified, namely:
foreign trade regulations, lifestyle change, protection laws and waste disposal. In the following
scenarios will be presented to assess the possible effect of the key drivers for change. The scenarios

7
will be divided in pairs as shown below and will focus mainly on positive and negative results of
the development.

• Foreign trade regulations (1): The import quota from China will be removed

Foreign trade regulations (2): The import quota from China will be tightened

• Lifestyle change (1): People will no longer be wearing underwear

Lifestyle change (2): People will increasingly use underwear to communicate their identity

• Protection laws: Increase in regulations on chemicals used in textile production

• Waste disposal: Increased regulations for chemical waste disposal in textile production

Foreign trade regulations

If EU will no longer execute a protectionist policy and open up for import from e.g. China, it could
result in the formation of a textile cluster in China. This would create more fierce competition for
the European textile producers e.g. JBS’s factory in Lithuania. If the protectionist policy is
tightened it can result in problems getting raw materials to the factory in Lithuania and a non-
European producer would be needed. This policy development is expected to be long term and
rather slow.

Lifestyle change

If the general attitude to wearing underwear shifts and many people stop to consume underwear, the
demand will drop dramatically. This risk is connected to the fashion cycle which not necessarily is a
stable change. On the other hand it can be that there will be an increase in consumers’ want for
signaling their identity with their underwear. This is expected to be a rather midterm but rapid
development.

Protection laws and waste disposal

8
These two factors are not seen as having a direct effect on JBS but more as affecting the companies
upstream. If there would be imposed regulations on which type of chemicals that were allowed to
be used it would imply that new substitutes for chemicals should be identified and possible
tested/approved for specific markets. It is assessed to be very unlikely that the regulations will be
eased. Regarding waste disposal it could happen that regulations on waste disposal will be more
restricted and thereby increase the costs and consequently sales prices. The latter is less likely to
give major changes than the previous one.

3.2 Meso-Environment
The purpose of this section is to identify what characterizes the industry that JBS is operating in.
The Porter’s Five Forces framework will be applied to assess the attractiveness of the textile
industry and to identify the sources of competition. First it is necessary to look at which SBUs JBS
has on the market in order to know which industry to look at.

The SBUs within JBS has mainly been identified on the basis of the company’s own separation of
its products into brands. A part from this, also external criteria have been applied with regards to
customer type and competitors. This has resulted in the following SBUs:

• JBS Classic – High end underwear for cool old-timers (High quality and history)

• JBS Fashion – High end underwear for daring young hipsters (Design and fashion)

• Dovre – High end underwear for the Norwegian men (Design and fashion)

• Egtved – High end socks for the Danish market (Quality and technology)

• Marathon/Olympia – Low/medium end underwear for men, women, boys and girls (Price)

This separation means that the entire company will be referred to as JBS, whereas the individual
SBUs will be referred to by their respective names.

All of JBS’s SBU operate on in textile industry. As there are only a few differences between the
SBUs they will subsequently be presented together. However when there are differences it will be
pointed out and treated individually.

• Threat of entry: There are many general entry barriers that are necessary to overcome in
order to enter the SBUs’ markets.

9
 A possible competitor might need to acquire the necessary production and storage facilities.
Hence there would be a capital requirement of entry. If this is the case there would be a
certain level of experience needed within e.g. production and the design. Additionally there
can be issues with regards to the distribution channels; however, in some cases with
established brands these barriers are already somewhat overcome.

Customer loyalty is mostly a barrier for SBUs with focus on brand and a high quality level
(JBS Classic, JBS Fashion, Dovre and Egtved). On the other hand, economies of scale are
mostly a barrier for SBUs focusing on the low cost segment (Marathon/Olympia).

It could be relatively straightforward for a clothing company with an already well

established brand to enter the market of JBS’s SBUs. There would however have to be
coherence between the image of the existing brand and the segment which it is chosen to
enter. Hence if a brand with an image of high quality would enter the market, it would have
to focus at high quality underwear as well.

• Competitive rivalry: The degree of competitive rivalry between the SBUs of JBS and their
closest competitors will now be analyzed.

The JBS Classic SBU is the biggest player in the Danish market for the high quality
underwear, while Dovre is the largest player in the Norwegian market for fashion
underwear. However JBS Fashion is in tough competition with especially Björn Borg that is
leading on the Danish market.10 There are also many other well-established brands
competing in this market for e.g. D&G, Calvin Klein, Hugo Boss and Armani. This
indicates a high level of competitive rivalry in the fashion segment. In the low-cost segment
where Marathon/Olympia is operating there are also many competitors and fierce
competition on price.

The Danish textile and fashion industry has shown a recent decline in especially exports and
show signs of a slight stagnation with moderate growth rates of between 2-4% per year. This
is in contrast to the total growth rate of 5.8 % in 2007.11

The market growth is assessed to be relatively high in the fashion underwear market
regarding both the Danish and Norwegian markets. It is also assessed that the
10
Ugeavisen Varde (2008)
11
Business.dk (2008)

10
 Marathon/Olympia SBU will have a relatively high market growth due to the decline in the
business cycle. Furthermore JBS Classic and Egtved are assessed to be in a mature market
stage and hence to encounter relatively stable growth rates.

• Threat of substitutes: There might be products that can be substitutes for the needs that
some of JBS’s products cover. This is mainly the case with the products of the Dovre and
JBS Fashion SBUs as these do not only cover the need connected to the functionality of
underwear but are also used to signal a lifestyle. Therefore these SBUs can to a certain
degree be substituted by other lifestyle products such as certain brands of clothes,
electronics and/or accessories.

In general the products of all the SBUs cover a need for warmth which can in some cases be
covered by other products. An example could be that an undershirt can be substituted by a
pullover or a jacket that provide the same warmth. Generic substitution is only regarded as a
minor threat for all of the SBUs as the products generally only represents a smaller part of
the customers’ disposable income. The threat is even smaller as underwear covers the basic
needs for warmth and comfort (physiological need). This claim is based on Maslow and his
“hierarchy of needs” which states that individual will seek to cover these needs before
pursuing “higher” needs.12

• Buyers’ bargaining power: The fact that the buyers (end-users) are acting on an individual
basis decreases their bargaining power. However they have rather low switching costs as the
functional needs covered by one underwear company are also more or less covered by all
brands/companies. However in the cases where the products are differentiated, the switching
costs for the buyers are higher which decreases their bargaining power. Other buyers of
JBS’s products are retailers. Their bargaining power also depends on their size, if they
organize when purchasing and the degree of differentiation of JBSs products.

• Suppliers’ bargaining power: The huge number of textile producers all over the world and
the fact that they are generally not organized, limits the bargaining power of the suppliers.
However their bargaining power is slightly increased in the cases where the textiles needed

12
Huitt, W. (2004)

11
 have to meet a rather high quality standard. This decreases the number of possible suppliers
making it harder to switch between them.

3.3 Micro-Environment
Until this point the potential future influences in the macro-environment on JBS’s strategy have
been analyzed, and the attractiveness of the industry was assessed in the meso-environment. These
analyses do not provide a detailed understanding of JBS’s competitors, customers, expectations,
purpose or strategic capabilities. This is necessary in order to identify what JBS’s future strategic
opportunities are. In the following these factors will therefore be analyzed.

3.3.1 External

3.3.1.1 Strategic Groups

Organizations in the underwear industry have different capabilities, strategies and market offerings.
In order to define JBS’s direct competitors and strategic opportunities, the strategic groups within
the company’s field of business need to be identified. The strategic groups within JBS’s field of
business are mapped onto a two-dimensional chart according to the relationship between price and
quality. The chart illustrates JBS’s SBUs and their competitors’ positioning on the market in the
minds of respondents consuming underwear and who knows the different brands.13

13
A.C. Nielsen (2006)

12
 1. JBS Classic 6. H&M (L.O.G.G) 11. Frank Dandy

2. Björn Borg 7. Schiesser 12. Dovre

3. Calvin Klein 8. Marathon/Olympia 13. Egtved (Socks)

4. Hammerthor 9. Claudio 14. JBS Fashion

5. Matinique 10. Hugo Boss

Figure 2: Market Position of Strategic Groups

From the chart it can be seen that JBS Classic is positioned as offering good.14 Its most direct
competitor is Hammerthor, but also Schiesser and Matinique are close competitors. The higher
priced brands such as Hugo Boss, Björn Borg, Calvin Klein, Frank Dandy,15 Dolce & Gabbana and
Giorgio Armani16 are assessed to be a strategic group competing with JBS Fashion and Dovre. The
closest competitors of Marathon/Olympia are Claudio and H&M.

14
Ugeavisen Varde
15
A.C. Nielsen (2006)
16
Danish Ministry of Education (2008)

13
3.3.1.2 Market Segments
After categorizing different strategic groups on the market for underwear and socks, the market
segments will now be identified. In the market for underwear, three broad market segments are
identified:

• The comfort seekers prefer comfort, functionality, quality and classic design and consumers
within this segment are typically aged +35 - characterized as the mature man/woman.

• The low cost seekers are the price sensitive consumers that are willing to compromise on
quality.

• The prestige seekers seek quality and fashionable design and have a need to wear
underwear/socks that have a prestigious image. They try to signal their personality through
their clothes and accessories. The consumers within this segment are relative less price
sensitive than consumers within the other two market segments and typically belong to the
younger generation.

The critical success factors are assessed to be design, comfort, quality, price and image – for both
consumers and retailers. Beside these features, retailers also require fast delivery. Attention should
therefore be paid to these factors when designing JBS’s strategy.

3.3.2 Expectations & Purpose

The stakeholders of JBS have an influence on the construction of JBS’s strategy due to their
expectations. When the managers make strategic decisions, they therefore have to take the
stakeholders into consideration. However, the stakeholders have different degrees of influence
depending on their power and interest in the company. In the following the most important
stakeholders and their influence on JBS’s strategy will be identified.

• Board of directors: JBS has a two-tier board structure where the top-tier board (board of
directors) consists of six persons of which three are members of the founding family
including Claus Bjerg Sørensen (CBS) who owns 100% of the stocks in the company. 17+18
There is also to some degree co-determination as two of the six board members are elected

17
A. Sandal, G. Søndergaard, P. Risegaard & V. Krøyer, (2008) p. 7
18
JBS Annual Report, (2007/2008) p. 3

14
 by the employees.19 The last board member is the chairman who is a local lawyer.20 The
lower-tier board (management board) consists of CBS as well as Michael Alstrup (MA) who
is the CEO and in charge of the day-to-day management of the company.
Since CBS is the person who owns the whole company and is a member of the top-tier and
lower-tier board, he has a high interest in the company and possesses the most power.
Therefore CBS has a great influence on JBS’s strategy. As the CEO and responsible for the
day-to-day management, MA does also have a great amount of power.
The influence of the rest of the board is dependent on whether the strategic management is
solely delegated to the management, or if the board is engaged in this process.
• Employees: The employees will have an influence on JBS’s strategy; however, since the
employees are not irreplaceable or economically involved, their influence is rather limited.
The power of the individual employee is also dependent on several factors e.g. his/her
hierarchical position or possession of essential knowledge.
• Other family members: Other family members that work in JBS (not in the board) are
assessed to have a similar influence like other employees; however, their interest in the
strategy might be higher due to personal involvement in the corporate history.
• Consumers: As mentioned in the Porter’s Five Forces analysis, individual consumers have a
limited influence on the price; however, clearly their requirements to the market offering
should be taken into consideration.
• Retailers: It is assessed that department store chains such as Dansk Supermarked who sells
Marathon/Olympia can have an influence on the price of the products of this SBU. If these
retailers demand a lower price, JBS may be forced to pursue a more cost efficient internal
strategy and/or a more cost efficient upstream strategy to remain competitive.
• Suppliers: The suppliers of raw materials will not have a great influence on JBS’s strategy
therefore it is not necessary to pay much attention to these in the construction of the
strategy. However, JBS must pay attention to its supplier in Turkey when planning its
strategy as they deliver half of JBS's products.

Below is illustrated the power/interest matrix. It shows how much power and interest the different
stakeholders have in JBS, and if any of them would have a considerable influence on the choice of

19
Ibid , p. 3
20
Dahl Advokatfirma

15
strategy. Moreover, it is useful to show who are important to address when changes are to be
implemented (section 5.3 Change Management).

Figure 3: Power/interest Matrix21

Apart from the expectations from the stakeholders, also JBS’s own expectations to themselves have
an important impact on the strategy and should therefore be included when considering whether to
make strategic changes. Some of these expectations are described by the ethical stance. The
variation in the ethical stance is shown on the continuum below along with the perceived ethical
stance of JBS:

Figure 4: Ethical Stance (own construction)

The reasoning behind JBS’s ethical stance is that it is using sponsorships (FC Midtjylland and
Herning Blue Fox).22 This indicates that its ethical stance is at least long-term benefit to the
shareholder as these sponsorships can be seen as social actions that are justified by their effect on
the company’s reputation. Furthermore the company also claims to have a focus on employees,

21
G. Johnson, K. Scholes & R. Whittington, (2007) p. 182
22
JBS Company Profile

16
distributors/retailers and end-users which can indicate an ethical stance where at least some of the
stakeholders are also considered.23

3.3.2.1 Corporate Values

Another part of expectations are communicated through corporate values. One of the central
corporate values of JBS is high quality/durability which has been the main goal since the very
beginning.24 In all of the SBUs JBS is striving towards providing and being seen as providing high
durability and quality. However in the Marathon/Olympia SBU there is also a focus on keeping the
costs reasonably low, but the quality is also here a central part of the business.

Another central corporate value of JBS is comfort. Just as quality, it has been part of JBS since the
beginning. It should be realized that comfort is not only a characteristic of JBS’s products but also
an attitude towards the organizational climate and the external stakeholders.25

3.3.2.2 The Mission Statement

It is assessed that JBS has constructed its mission statement based on its corporate values. The
mission statement of JBS is the following:

”JBS ensures that you feel comfortable. Every day. All day.”26

The mission statement incorporates the corporate values since the quality/durability is expressed
mainly in the last part, whereas the comfort is expressed in the first part.
The mission statement and its content does not only apply to JBS’s customers but also to other
stakeholders such as employees and retailers.27 The mission statement is therefore closely connected
with JBS’s ethical stance described in section 3.3.2.

3.3.3 Internal

3.3.3.1 Strategic Capabilities

In the following JBS’s strategic capability will be examined. It will give an indication of JBS’s
ability to compete in the market and achieve success. JBS’s strategic capabilities depend on its

23
A. Sandal, G. Søndergaard, P. Risegaard & V. Krøyer, (2008) p. 7
24
JBS Filosofi
25
A. Sandal, G. Søndergaard, P. Risegaard & V. Krøyer, (2008) p. 35
26
B2C Superbrands, (2006) p. 2 (Translation of: ”JBS sikrer, at du føler dig godt tilpas. Hver dag. Hele dagen”)
27
(Ibid), p. 2

17
resources and the way it employs and deploys these.

• Threshold capabilities
Threshold capabilities are those competences and resources which are necessary to possess
to compete in the market. It will now be examined which threshold capabilities JBS
possesses.
JBS has an ability to continuously deliver products demanded by customers based on its
corporate values.28 This must be said to be a threshold competence. It also indicates that the
company employs people who possess the necessary market knowledge (intangible
threshold resource). JBS’s relatively big stock can be said to be a threshold tangible
resource, as it makes fast deliveries possible.

• Capabilities for competitive advantage

The focus will now be on which capabilities that underpins competitive advantage and are
difficult for competitors to imitate or obtain.
JBS’s long established and well-known brand (90% brand awareness in Denmark29) is a
unique intangible resource on the Danish market. This increases the probability that the
target groups consider buying JBS underwear when having a need/want for new underwear.

28
B2C Superbrands, (2006)
29
B2C Superbrands, (2006)

18
 Offering high product quality is JBS’s core competence. From the selection and processing
of raw material till the production of the final product, JBS makes sure that the high product
quality is ensured. JBS’s ownership of its production facilities in Lithuania is one of the
factors that make it possible to sustain high quality. Additionally when JBS selects its
suppliers it does not look at price as the number one criteria, but instead it ranks quality as
number one, delivery security and service as number two, price as number three and loyalty
as number four.30

Cost efficiency: Being cost efficient is increasingly becoming a threshold strategic capability
caused by consumer demands and competitive rivalry. In the following JBS’s focus on being cost
efficient will be analyzed:

• Economies of scale: A few years ago, JBS had a finished goods stock in both Denmark and
Norway, but today there is only one central stock in Herning. It can be said that JBS benefit
from economies of scale by having only one central finished goods stock. On the other hand,
its distribution costs are higher than if JBS would have several of these stocks. However, it
is presumed that the current solution is less cost intensive.

• Supply cost: As mentioned above, JBS selects its suppliers based on quality, delivery
security and service, price and loyalty. The fact that the company outlines that price is only
the third most important criteria, it is assessed that JBS is willing to compromise on price as
long as it is supplied with high quality products and favorable delivery conditions.

• Product/process design: Efficiency gains in the production process are achieved by

relocating its production to Lithuania and by purchasing finished goods from its external
partner in Turkey. Especially labor wages is a cost account where JBS cuts costs compared
to if its production would be located in Denmark. Moreover the quality management from
JBS clarifies and might improve the processes within the company. JBS will know what
output a certain input gives due to the knowledge about processing the input. This also
lowers the number of defects so waste can be kept low or optimally at zero.

30
A.C. Nielsen (2006)

19
 • Experience: JBS has 70 years of experience within the underwear industry indicating that
the company has a competitive advantage over less experienced competitors in terms of
market and customer knowledge. Moreover, the company has a relatively high number of
employees with high seniority which also gives a good foundation for achieving a lower
cost per unit than competitors due to their experience.

3.3.3.2 Portfolio Overview

The present situation for the portfolio of JBS will be examined to give an indication of the potential
value of each SBU. This will give a further basis for deciding what to do with each SBU with
regards to in- or de-vestment. The decisions regarding this as well as the basis for these decisions
will be discussed in section 4.1 – “SBU Strategy”. The evaluation of the attractiveness of the SBUs
will be done using the directional policy matrix which is also known as the attractiveness matrix.
The result of this analysis is shown below:

Figure 5: Directional Policy Matrix

This matrix has been constructed with the information from the Porter’s five forces analysis as well
as an assessment of the future development of the respective market segments making up the long-
term market attractiveness. The SBU strength has been evaluated as a mix between the market share

20
of the respective SBUs as well as an assessment of the strength of the SBUs’ brands. The method
can be seen from appendix 1 that contains the spreadsheet which the matrix is based on.

3.3.4 Strategic Position

A SWOT analysis will be conducted in order to summarize the key issues that can affect the
strategic choices, to identify the strategic position of JBS and to identify to which extend the current
strengths and weaknesses are able to deal with the threats and capitalize on the opportunities in the
business environment. The SWOT analysis of JBS is shown below followed by descriptions of the
points for which a more detailed description is thought to be necessary:

Strengths Weaknesses
Ownership/management
Strong brand (JBS) Ownership/management
Construction of clothes
Product quality Resistant to change (JBS) family owned
Quality control
Many years of experience High seniority - rigid culture
High seniority - strong culture
Opportunities Threats
Foreign trade regulations
Environment protection laws / waste
Popularity of fashion underwear disposal
Degree of rivalry in certain strategic
groups
Business cycle Low growth on Danish market
Business cycle

The first of JBS’s strengths is the ownership/management situation in the company. As previously
mentioned CBS is both on the board of directors and on the managing board and as there are no
other shareholders, decisions are more easily made. Additionally dividends only need to be paid if
CBS is in need of money otherwise the earned capital will stay in the company. The ownership

21
situation can also be a weakness as there is mostly one set of eyes on “the ball”. The other board
members have some influence but ultimately CBS has power over the entire capital. Furthermore
JBS Classic has a strong brand with a long history and solid position in its segment. They possess
employees with expert knowledge in designing and constructing underwear. Generally the
employees have many years of experience in the company and hence JBS has a strong company
culture. The employees know the vision of JBS and works towards it almost automatically. JBS also
has a good and stable product quality which is also connected to their systematic quality control
system.
A weakness of JBS is a tendency towards resistance of change in both the management as they are
family owned, but also among employees due to the strong somewhat rigid company culture.

The opportunities of JBS are in their price-point strategy31 where they offer underwear in most
levels of prices. This will be important in the current business cycle as people might try to save
money also on the basic goods and hence the low cost SBUs will benefit.

With Dovre and JBS Fashion JBS has positioned themselves in the medium to high price range,
which means the customers that still want some fashion products can choose JBS as the less
expensive option. Some of the current customers in the fashion segment might instead chose to buy
the low cost brand marathon/Olympia. This indicates that the development of the business cycle
will not be highly critical to JBS as it covers the different price-points.

The threats to JBS are as described in 3.1.1 Scenarios, issues such as changes in foreign trade
regulations that can increase competition radically or changes in protection- and waste disposal
laws that can affect the upstream suppliers and increase prices etc. of raw materials for JBS.

Furthermore section 3.2 Meso-Environment shows that in both the low-cost segment and the
fashion segment there are high levels of competitive rivalry. Additionally the Danish textile
industry has shown signs of lower and stagnating growth rates for the Danish market.

31
http://kortlink.dk/blogspot/6nrn

22
4 Strategic Choices

4.1 SBU Strategy

In order to be able achieve a competitive advantage, each SBU must have a competitive strategy. To
ensure that this is the case, each of JBS’s SBUs will evaluated using the Strategy Clock:

Firstly a strategy for Marathon/Olympia will be suggested. The analysis of the micro environment
indicated that Marathon/Olympia and their main competitors are targeting the low cost seekers. This
would indicate that JBS should pursue either a “No frills” (1) or a low price (2) strategy with this
SBU. As it is seen as unlikely that JBS can follow its own corporate value of high durability while
pursuing a “No frills” (1) strategy, the low price (2) strategy seems to be the best fit for
Marathon/Olympia.

23
The strategies of JBS Classic and Egtved are suggested to target the segment of comfort seekers and
therefore use a differentiation strategy (4) in order to further increase their quality. This is perceived
to make their respective market offerings even more attractive to their target group. The fact that
both SBUs target a similar part of the market makes it a viable option to combine them under a
common SBU and common name which would most probably be JBS Classic. The consequences of
abandoning one of the names and thereby risk losing potential loyal customers should be considered
before making a decision. On the other hand a combination would result in the possibility of
achieving economies of scale in such areas as marketing, administration and production. Combining
them would also help in avoiding cannibalization i.e. neither of the SBUs achieving the sales
volume that would be possible if the other SBU was not on the market. It is also very likely that a
combination of the two SBUs will release some resources that can then be used to improve the
remaining SBUs. Furthermore it can be seen from the directional policy matrix in section 3.1.3.7
Portfolio Overview that Egtved is the SBU which is the least attractive and the analysis shows that
de-investment is recommended. It is therefore assessed that the lost benefits from the abolishment
of the Egtved brand are smaller than the potential benefits from combining the two SBU. Therefore
Egtved will not be considered beyond this point as it is included in the JBS Classic SBU.

Dovre and JBS Fashion are also recommended to follow the same strategy. They are namely both
targeting the prestige seekers segment and are therefore suggested to follow a focused
differentiation (5) strategy where the focus is on design. They are however presently operating on
different markets and there is therefore no risk of cannibalization. On the other hand JBS Fashion
seems to have a problem with being perceived as similar to JBS Classic as both SBUs are using the
“JBS name” which can be interpreted as an attempt from JBS Classic to provide credibility to the
JBS Fashion SBU. The problem is not reduced by the fact that they are also marketed together.
Furthermore their customers seem to have an image with a temporal focus which is stuck in the
past. These problems are visual from the directional policy matrix in section 3.1.3.7 Portfolio
Overview where JBS Fashion is rather unattractive due to its low strength. Dovre on the other hand
is experiencing a lot of success which is also shown in the directional policy matrix where it is the
most attractive of all of JBS’s SBUs. Dovre is currently the biggest producer in Norway despite the
fact that Björn Borg is also operating on the Norwegian market and that Björn Borg is the largest
player on the fashion underwear market in Denmark. This could indicate that Dovre has a market
offering that the target group finds more attractive than Björn Borg’s market offering. Therefore
JBS Fashion will not be considered beyond this point as it will be included in the Dovre SBU.

24
This means that in the case where there were two departments, one for each SBU, there will now
only be one.

4.2 Portfolio Evaluation

In the following the portfolio of JBS will be evaluated in order to identify if JBS can create value
for its SBUs. This will be done by the help of the parenting matrix or Ashridge Portfolio Display.

This shows that JBS Classic is a heartland business due to its direct focus on delivering high quality
to the end user.

The critical success factor of Marathon/Olympia and the capabilities of JBS might fit less than JBS
Classic does. Still Marathon/Olympia is a heartland business since quality management will help
JBS to reduce its costs in order to improve its competitiveness in the strategic group.

The critical success factor of Dovre fits JBS’s capabilities less than Marathon/Olympia – maybe
this SBU is even on the edge of a value trap business. Ensuring a high quality for the hip
youngsters is of importance.

25
In this strategic group there is another variable dimension namely the fashion trends and movement.
It is very important for JBS to be able to foresee or be updated with the newest fashion streams.
This might even be a more critical success factor for this SBU than ensuring quality, although the
quality is important. Therefore JBS has to be aware not to destroy business opportunities for Dovre
rather than helping them exploit them. This is although it seems like JBS can create value for them.

It is concluded that the portfolio is good for JBS. The company only has to be aware of not
interacting in decisions that are fashion-related within Dovre since it has a tendency to be a value
trap business, although quality is very important.

4.3 Strategic Development

Now the SBUs have been evaluated and in some cases also combined to collect resources and
competences in new SBUs. The next step is to establish how the SBUs are to develop and grow.
When doing this it is important keep a holistic and company-wide view even though each SBU’s
situation has to be evaluated individually. In order to examine the possible directions of the strategic
development the Ansoff’s product/market matrix will be used.

The first SBU that will be considered is Dovre. The Dovre SBU is presently on the Norwegian
market and will after the inclusion of JBS Fashion “automatically” also enter the Danish market.
This will be regarded as a market development into a new territory as Dovre was not previously on
the Danish market. This market development will however not be considered under 4.4.
International Strategy as Denmark is the home market of JBS. This entry into the Danish market is
however not expected to be easy and straight forward. This is mainly based on the previously
mentioned fact that the Danish player in the fashion segment in Denmark, Björn Borg, is also
competing with Dovre on the Norwegian market where Dovre is the largest. This means that Björn
Borg will probably take Dovre’s entry very seriously and at least some degree of retaliation can be
expected. This makes it even more important that Dovre makes a very powerful entry. This could be
done by establishing a very extensive marketing campaign. It is also important to ensure access to
the right distribution channels for this type of products even before the actual entry. On the longer
run, Dovre can very well benefit from the growth that is expected in the market which can be
expected to ease its entry a bit. Also the experience that JBS already has with Björn Borg on the
Danish market from JBS Fashion as well as the experience from Björn Borg competing with Dovre
in Norway can prove to be very beneficial.

26
Apart from market development, it is also recommended that Dovre engages in product
development with existing capabilities. The reason is that Dovre is operating in a segment with
rather short product life cycle which makes it important to always evolve and follow the trends.
Failing to do this will make its market offering less attractive to the target segment than that of its
competitor which underlines the importance of product development which is also a critical success
factor for Dovre.

The segment of the JBS Classic SBU on the Danish market is expected to experience a rather stable
growth rate which gives encouragement to expand the SBU onto other markets. It is therefore
recommended that a market development into a new territory is initiated. This market development
will be described further under section 4.4 – “International Strategy”.

With regards to the Marathon/Olympia SBU it is recommended that market penetration of the
Danish market is a part of the direction of strategic development. The reason is that the
Marathon/Olympia’s segment is expected to grow which can provide a basis for an expansion of its
market share. It is however only recommended to be a part of their strategic development as the
competition in the segment is very fierce which can make it hard to take advantage of the market
growth. Therefore it is also recommended that Marathon/Olympia engages in market development
into new territory to attempt to find a market which has lower competition in this segment but
where similar growth rates are expected. Further considerations with regards to this market
development are made in the following section.

4.4 International Strategy

As explained in the previous section, JBS Classic and Marathon/Olympia are suggested to pursue a
market development into a new territory. A part from the usual considerations regarding which
territory and how it should be entered, the fact that the SBUs are developing in this direction at the
same time gives some opportunities that should also be considered. These considerations will be
made below.

When selecting the territory or country that should be entered, several factors have to be taken into
consideration e.g. macro environment as well as similarities in cultural norms and social structures.
Broadly speaking these consideration areas tell that it will be easier for JBS to expand within the
EU and maybe the Western part of EU in particular as these countries are regarded as being very
politically stable, being able to provide the needed infrastructure, high monetary stability towards

27
the Danish Krone due to the ERM2-cooperation. Moreover they also have a relatively high
similarity with regards to cultural norms and social structures.

In terms of logistics it can be seen as very attractive to enter Sweden. On the other hand there is
regarded to be a significant degree of risk connected with entering the Swedish market as it is the
home market of Björn Borg. Moreover Björn Borg can very well be expected to attempt some sort
of retaliation on any JBS SBU that might try to enter Sweden because the entry of Dovre on the
Danish market can be perceived as a sign of war. Another possible territory could be Germany
which is also rather attractive due to its proximity which would be beneficial in connection with
logistical matters. There is however also a certain risk connected with this option as this is the home
market of Schiesser which is targeting the same segment as JBS Classic (see figure 2). Another
possibility could be the Dutch market where JBS Classic already has sales offices. This means that
for JBS Classic this would not really be a market development but instead a market penetration. It is
assessed that the Dutch market provides better opportunities to develop in the wanted way since the
presence of Schiesser on the German market and Björn Borg on the Swedish market would
complicate an entrance of JBS Classic significantly.

Due to the fact that JBS Classic is already on the Dutch market, even if it is in a very small scale,
makes the decision of the market entry mode relatively easy. As JBS has already made a direct
investment in the Netherlands it has already committed itself to the host country and the only
downside would then be the potential loss of the investment needed to expand the operation. This is
assessed to make foreign direct investment the most preferable market entry mode.

To end the international strategy section, it will be described how JBS can take advantage of the
expansion of the JBS Classic SBU and at the same time entering the market with the
Marathon/Olympia SBU. One of the things that might prove valuable to JBS is the fact that it is
already present in the Netherlands with JBS Classic: In this connection it seems reasonable to
assume that the consumers, at least to some extent, have an image of JBS as a producer of high
quality underwear. This will enable JBS to use this image to provide credibility for the
Marathon/Olympia SBU. In this connection it is worth noticing that this was the strategy that gave
JBS problems in Denmark with its JBS Fashion SBU. This situation is however believed to be
different as it will be the high-level JBS Classic SBU that will be providing the credibility for the
medium-level Marathon/Olympia SBU, whereas it in the Danish case was a high-level historical
brand that tried to provide credibility for a high-level fashion brand.

28
As JBS Classic has previously only been sold to a rather limited extent in the Netherlands it is
assumed that the access to retailer and other sales channels in general are rather limited. Also with
regards to this the expansion/introduction situation might be beneficial. The reason is that getting
shelf space in supermarkets and retail stores is rather difficult in general since many retailers want
to be able to provide a wide assortment of goods within a specific category, but at the same time
they seek to simplify their logistics operations by having as few suppliers as possible. The fact that
JBS can provide products within two price ranges is therefore expected to ease the acquisition of
new sales channels. Also in the cases where JBS Classic is already sold through the particular sales
channel it will get easier. This might be the case as the JBS Classic product can help in creating
pull-effect for the Marathon/Olympia products after they start to be advertised. This is however
mainly the case if JBS Classic is used to provide credibility for Marathon/Olympia.

29
5 Implementation
Above it has been decided which strategic choices JBS should make based on the analysis. This
chapter will focus on how these strategic choices should be implemented.

5.1 Configuration
A company’s configuration consists of the structure, the processes and the relationships. There
must be a fit between the design of these elements and the company’s strategy and strategic
challenges to ensure success. In the following it will be assessed how JBS’s structural design should
be designed to cope with the strategic challenges in the best possible way when also taking speed of
change, knowledge creation and sharing, and internationalization into consideration.

Structural Design

JBS is a small organization and has a flat, top-down functional structure with no formal HR-
department.32 Currently it has a sales office in Norway and The Netherlands, and sales agents in
Germany and Canada. A functional structure is preferable for small companies with less diversified
businesses. It gives a clear definition of roles and tasks and fosters concentration of expertise and
development of knowledge in functional areas. However, because functional structures are not
diversified around products or markets, the consequence can be that approaches are too uniform and
not customized to each SBU or geographical areas. Since it has been suggested that JBS should
increase its export activities, it is necessary to pursue strategies that are more tailored to the
different geographical markets. It is therefore suggested that the structure of JBS should be more
multidivisional. A multidivisional structure consists of several divisions based on product, service
or geographical areas and is more concerned with decentralizing functional areas. It is assessed that
in each country JBS is operating in, there should be a sales & marketing division. This will allow
for specialization and more precise execution of the sales & marketing activities that will fit the
specific target groups in each country. Another suggestion is to divide each geographical sales &
marketing department around SBUs i.e. specific employees focus on a specific SBU. The latter
suggestion is clearly depending on the size of the sales & marketing department. Additionally, it
depends on how many SBUs which are sold in each geographical market.

32
A. Sandal, G. Søndergaard, P. Risegaard & V. Krøyer, (2008) p. 62

30
The production function should be kept unchanged, and the finance, design and construction
department should be kept centralized. Currently the HR function is handled by the CEO; however,
as the company grows in size it is preferable to have other employees to be responsible for this area,
so that the CEO can focus on important strategic aspects.

Processes

How a company is structured is a key determinant in strategic success or failure. Additionally how
its control processes are handled can also influence if the strategic implementation is successful or
not. JBS’s operations must be controlled in the way that best suit the company and its circum-
stances. A company’s control processes concerns input and output, and they can be controlled either
direct or indirectly as illustrated below:

Since JBS’s departments and partners are located in several countries and perform different
activities, JBS should deploy both direct as well as indirect control measures.

Planning processes i.e. planning the allocation of resources (input) to different parts of the
organization and monitoring the utilization of the allocation, is also a preferable measure to employ
especially after the international expansion with new regional sales & marketing departments. In
order to control the amount of financial resources allocated to these sales & marketing departments,
JBS should require them to report how they spent them. The headquarters should continuously
monitor the utilization and actual costs to what was originally planned. This ensures a controlled
set-up of these departments.

It is assessed that the control processes in connection to output should be direct which means that
there should be sat up performance targets e.g. key performance indicators that different parts of
the organization should fulfill. This could be in relation to customer satisfaction, costs, revenue,
profits, financial ratios and quality. A Balanced Scorecard is particularly useful for directly

31
controlling output. Setting up performance targets also avoids having a controller physically present
to observe the processes i.e. direct supervision.

Relationships

How JBS’s relationships are shaped internally and externally also affects the configuration of the
company and its response to the environment. If the needs of the customers changes rapidly, and
specific market knowledge is required to make fast strategic decisions, decentralization of strategic
decision making is preferable, since centralization in such a situation would make the company
inflexible.

The underwear/socks market is generally not characterized by fast changing needs of customers or
highly specific market knowledge. It is only the market for prestige seekers that changes in terms of
style and design. It has therefore been assessed that the division of responsibilities for strategic
decision making between the centre and the business units in JBS should follow the strategic
planning style. It is the most centralized style compared to the financial control style and the
strategic control style. This style implies that the centre of JBS is the master planner of the
company’s strategy. The centre decides what the departments should do and what should happen to
the SBUs on the strategic level and controls and coordinates all of the business unit activities. The
different departments are then responsible for the operational activities determined by the strategic
plans. Applying such a strategic style requires that the centre possesses the necessary business unit
knowledge. JBS should be aware that such a style implies potentially de-motivated employees and
bureaucratic costs due to centralization.

Concerning the strategic decisions regarding JBS’s fashion underwear, the centre should make
strategic decisions by also relying on employees with specific knowledge regarding this market.
This is especially important due to the fact that Dovre has a tendency to be a value trap business
although it is evaluated to be the most attractive SBU. This implies that JBS should only interact in
quality matters and not if the decisions are related to design in order not to harm the business
opportunities for Dovre.

Concerning the external relationships then JBS should make sure that its relationships to the
Turkish supplier and retailers foster consistent performance according to JBS’s strategies, values
and standards.

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5.2 Resourcing Strategies
To enable a successful implementation of the strategy managers must be aware of the relationship
between the overall business strategy and the separate strategies in the following resource areas:
people, information, finance and technology. The approach to managing these areas will be
presented in the subsequent section.

Managing People

A central part of a manager’s role in the organisation’s strategy is to create an environment in which
people strive to achieve success and facilitate the motivation of the individuals. It is suggested to
look at the people dimension of the strategy as consisting of three parts namely: people as a
resource, people & behaviour and organising people.

People as a resource is concerned with the hard aspects of HRM and focus on how to motivate
people to create competences in the activities which are needed in order to successfully run the
business. The following practices can help enable successful strategies for JBS:

It is important to focus on performance management through goal setting and evaluation in relation
to the strategy of both the individual and teams. In this connection a reward system that creates
incentives related to the strategy is recommendable. Furthermore JBS should consider any
recruiting opportunities that could improve the strategic capabilities. Lastly training and knowledge
sharing can improve and ensure the strategic capabilities of the company. Knowledge sharing is an
important issue for JBS as it has several employees whom possess expert knowledge. It is therefore
critical to make these employees to codify and share their expertise in order to prevent loosing these
competences. People & behaviour is concerned with the softer aspect of HRM which is also
important in implementation of strategic change. Many problems of managing change are results of
failure to understand, address and change the behaviour of people. It is critical for the management
at JBS to be aware of their own behaviour as this can influence the implementation of the strategy.
Organising people is concerned with the issue of where in the organisation the HR function is
placed. In JBS there is no formal HR function. The responsibilities are undertaken by the managing
director MA in the Danish headquarters. An advantage of this is a strong relation to the top

33
management and hence a greater opportunity to involve employee issues in the strategy. However it
is a risk that the managing director does not have all necessary capabilities to undertake this
function.

As mentioned earlier, a formalized HRM function could assist with the HR activities, facilitating
the strategic considerations of Human Resources and thereby the overall corporate strategy. In this
connection it is also important to consider the short and long term focus of HR strategies. In the
short term it is essential to maintain the competitiveness by ensuring people’s support for the
strategies. In the long term it is important to provide a foundation for building new strategies e.g.
through reviewing the culture or competences. Additionally there should be focus on obtaining a fit
between the two tenures of strategies to avoid contradictions.

Managing Information

There are numerous factors in information management which are important for organizations to
focus on. The processing of the massive amounts of data companies possess is essential as it can
provide valuable knowledge about the markets. This processing can be done through IT systems
that can identify trends and patterns from all the raw data. Hence information management is
critical for the company’s strategy. JBS could benefit from such systems especially when expanding
its operations to new markets. The information generated through such an information management
system is critical to the decision making process. It should however be noted that IT systems are
limited and cannot replace for instance intuition or knowledge sharing dependent on social contact
such as transferring tacit knowledge.

Managing Finance

Finance and the method of managing it can be important for the strategic success. This is due to the
fact that the outcome of the activities should be a financial yield. This would provide dividends for
the shareholders and capital for reinvesting for the future.

The influence of finance on enabling success can roughly be divided into three categories:
managing for value, funding strategies & financial expectations.

Managing for Value

34
JBS’s ability to create value on a long term basis is critical for the success attainable with the
strategic choices. JBS would be suggested to look at the potential sales numbers for the potential
new markets and evaluate this information in the decision making process. Additionally the
production cost should be evaluated and kept under control. Furthermore, when expanding to new
markets it is critical to evaluate the costs of selling and the difference in sales channels. Moreover
the cost of marketing operations in the local markets should be included in decision making.

Funding Strategies

The export oriented strategy and the launch of Dovre on the Danish market calls for significant
financial investments. Due to this it is important for JBS to consider how to obtain the required
capital. Methods to acquire this capital are: obtaining a loan in a financial institution, expanding the
share capital and adding additional equity. There are advantages and disadvantages to them all and
the preferred method is also affected by the market development and thereby the risk level of the
SBU. As JBS has both SBUs in fast and slow growth markets with high market shares there will be
a need for low to medium risk of capital funding.

Financial Expectations

As mentioned in section 3.3.2 – “Expectations and Purpose” JBS has several stakeholders such as
the board of directors, employees, other family members, consumers, retailers and suppliers.

The issue is that the stakeholders will have expectations to the financial output of the organization.
To which extend the corporate strategy shall address these considerations depends on the relative
importance of the stakeholders to JBS. The largest stakeholder is CBS who is the owner and sole
shareholder, MA is the CEO and handles the day-to-day management. In this situation there is a
slight possibility for a distortion between the strategic expectations of CBS and the actual strategic
output.

Managing Technology

The technological level of JBS is relatively low as there is little R&D in the underwear market. The
place where technology could be of interest is in the production facility in Lithuania but that would
be mostly relevant for improving the speed of production and lowering the cost. The underwear
product itself is difficult to substitute but there could be small improvements in for instance fabric
types. However this function is upstream from JBS but it is still something to be aware of.

35
5.3 Change Management
The last two sections dealt with the importance of structuring the configuration of JBS and
organizing its resourcing strategies in an appropriate way. However, these issues do not alone
ensure a successful implementation of a strategy. The managers at JBS must plan how to address
potential problems with inertia and resistance to change among its employees that may arise from
introducing strategic changes.

5.3.1 Diagnosing the Change Situation

In order to know how to manage the strategic changes, the type of changes JBS is about to go
through must be diagnosed. It is assessed that introducing existing products to new and existing
markets and focusing on developing products with existing capabilities are incremental changes.
This means that JBS are to rely on more or less already existing skills, routines and beliefs when
implementing these changes. Combining SBUs under the same brand names and as a consequence
also combining departments requires structural changes and disruption of old routines. However,
none of the changes are of such a large extent that a fundamental change in the culture is needed to
implement the strategic changes. JBS is therefore to implement two types of changes: adaptation
and reconstruction. Though JBS is not to change the culture which could have been a difficult task
due to the long-established norms, beliefs, routines and rituals JBS’s business is built on, the
challenges JBS is headed towards can still be difficult due to the context the company is operating
in.

The time, scope, preservation, diversity, capability, capacity, readiness and power are all contextual
features that decide how the strategic change program should be designed. Together with a
forcefield analysis it is possible to identify what factors work for and against change. The forcefield
analysis can furthermore help indicating where to put focus in the strategic change program but also
whether the strategic changes are even possible.

It is assessed that JBS’s strategic change program should focus on implementing the changes in the
nearest future while making sure that the employees’ conscious behavior is also changed. JBS is not
facing a crisis, but staying passive for too long would cause the revenues and market shares to drop
further. It is assessed that the company employs a staff with the necessary diversified experience

36
and capabilities to implement the changes, since many of the employees have experienced similar
strategic changes in the past - especially international expansion and product development.

Also still focusing on the company’s core products and markets will work for a successful
implementation. Combining SBUs and departments are however new challenges that must be
addressed, therefore the implementation and the organization of it must be considered thoroughly.
Moreover, it is the opinion that JBS’s rigid and perhaps conservative culture, and the family’s
personal commitment to the company are factors that could block change. It could also be imagined
that renaming the JBS Fashion SBU is something that is hard to convince the family is a good idea,
since it could feel like giving up on the family name. The resistance towards change will therefore
also need to be addressed in the strategic change program.

5.3.2 Coping with Strategic Changes

JBS must first of all communicate the reason for strategic changes to all stakeholders and inform
what should be done. It will typically be CBS and/or MA that make the strategic decisions for JBS;
however, they cannot implement the changes alone. They need to get support for the strategic
changes from stakeholders throughout and around the organization since without their support the
strategy cannot be put into action.

In order to reduce resistance, it is vital that all stakeholders are convinced that the changes are
necessary and that the potential gains from these changes will outweigh the potential losses. It is
especially important that the most powerful and resistant stakeholders are addressed (Figure 3 -
power/interest matrix), since they are some of the biggest blockers of change. Additionally getting
the support from the most powerful and respected stakeholders can help easing the process. Each
employee must also be informed of how it will affect his/her day-to-day operational processes and
routines, and lay-off of personnel must be announced as soon as possible. These initiatives will
reduce uncertainty.

Especially the middle managers are seen to play an important role in a top-down approach in terms
of making sure that resources are allocated and controlled properly, that employees understand the
need for change, make sense of and operationalize the strategic guidelines set up by CBS and/or
MA, report to the top if there are blockages or if anything goes wrong etc.

CBS, MA and the middle managers need to be aware that their style of management must be
adapted according to the situation. As mentioned some people may be more willing to follow the

37
changes than others, and therefore each person must be approached differently. It must also be
pointed out that each individual’s readiness sometimes differs during the change period, and that the
management must apply different styles at different stages.

If JBS should implement the changes rapidly a direction management style would be appropriate to
save time. However, if there is experienced a lot of resistance and JBS is not under extreme time
pressure, a participative management style could be beneficial. If employees are involved in
designing action plans it can foster commitment and motivation and will most likely change the
attitude of the employees. The participative style is especially preferable when coping with the
adaptive changes where input from employees is useful.

It is important for the managers to understand that implementing change is a process and not just a
one-time event. The managers must continuously evaluate the results and address aspects that block
change immediately. One way of motivating stakeholders to stay committed to the plan is to show
that the actions taken are successful – especially in the beginning of the change process this is
important.

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6 Conclusion
The macro environment of JBS is rather stable. Several of the key drivers for change identified for
JBS are governmental decisions which can be very hard to influence. Therefore JBS should focus
on how to overcome these problems instead of lobbying to change them.

Entry barriers for the markets of SBUs with high quality are customer loyalty and for SBUs with
low costs the barrier is economies of scale. Furthermore there will be a significant learning curve
within design and production. Other barriers are acquiring the necessary production and storage
facilities as well as capital requirement. There is a high competitive rivalry in the fashion segment
and the low cost segment. Furthermore both these markets are assessed to have relatively high
market growth. The market for high quality is assessed to be in a mature phase and expected to
encounter relatively stable growth rates. Generally the threat of substitutes is low within the market
as underwear can only in rare cases be substituted with other products that cover the same needs.
Both the buyers’ and suppliers’ bargaining power can be considered to be medium but varies due to
product differentiation and product quality.

JBS’s SBU’s were assessed to be positioned in three strategic groups. Marathon/Olympia was in a
strategic group perceived to focus on low price and low to medium quality; JBS Classic and Egtved
in a group perceived to focus on high quality and medium prices, whereas as Dovre and JBS
Fashion was in group perceived to focus on high quality and medium to high prices.

Three different market segments were identified: the comfort seekers, the low cost seekers and the
prestige seekers.

When it comes to strategic capabilities, the threshold capabilities within JBS’s market are fast
delivery upon demand, market knowledge and cost efficiency. JBS is assessed to have all three.
Furthermore JBS has a very high brand awareness and product quality which is considered to be
their capabilities for competitive advantage.

The expectations to JBS come from many different stakeholders, but they are not all equally
important for the strategy of JBS. In this respect, JBS has to be most aware of the expectations of
Michael Alstrup and Claus Bjerg Sørensen as they both have high power and interest concerning
the strategy of JBS.

39
The purpose of JBS is to deliver quality/durability and comfort to its customers as well as other
stakeholder. This is mainly to be achieved through its products but also through other means.

Based on the analysis of the environments, strategic choices were made. Concerning the strategies
of the SBUs, it is recommended that Marathon/Olympia follows a low price strategy to strengthen
its position. Furthermore as JBS Classic and Egtved are in the same segment and are both proposed
a differentiation strategy, it is recommended that the two SBUs are combined under the JBS Classic
name. A similar combination of JBS Fashion and Dovre is recommended under the Dovre name as
they are both suggested to follow a focused differentiation strategy and are in the same market
segment. It should be noted that this portfolio is perceived to be good for JBS but that it should
watch out with interfering in fashion decisions in the Dovre SBU.
The analysis of JBS’s SBUs showed that Dovre is the most attractive SBU which would indicate
that investment should be made in this SBU. On the other hand it also showed that Egtved and JBS
Fashion were the two least attractive ones and that de-vestment should be considered.

After the analysis of the macro-, meso- and micro environment, a SWOT analysis was made to sum
up what was found out. The strengths of JBS are a strong brand and extremely high experience and
seniority. This seniority can unfortunately also work as an inhibiter for change. JBS has good
opportunities in the current business cycle due to its price-point strategy and the main threats appear
to be the high degree of rivalry and stagnating growth on the Danish market.

JBS should perform a role as a parental developer with quality management as a core competence,
because this is how it can add value for its SBUs. It is very important for JBS to realize that Dovre
has a tendency to be a value trap business. Its core competence in quality management should
further be developed. It is of importance that JBS keep improving and gain new knowledge in this
field to continuously be ahead of competitors. The high focus on quality management will help JBS
to lower its costs, which in future could make them cost leader in specific strategic groups.

Due to the previously mentioned combination of JBS Fashion and Dovre on the Dovre SBU,
Dovre’s development will include a market development on the Danish market. Additionally Dovre
should be engaged in product development to keep up with the demands in its segment. The
Marathon/Olympia SBU is recommended to attempt market penetration on the Danish market but

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as this might be difficult due to fierce competition, a market development is also suggested. This
market development will be done together with JBS Classic.

The market development of JBS Classic and Marathon/Olympia is suggested to be on the Dutch
market. This entry will be performed by expanding JBS’s already existing investments in the
Netherlands. JBS can make use of the fact that it is entering with two SBUs at the same time when
gaining access to distribution channels and by making JBS Classic provide credibility for
Marathon/Olympia.

When implementing the strategic changes, JBS should change its structural design to be more
multidivisional in order to pursue sales & marketing strategies more tailored to the specific
geographical markets. It was assessed that when controlling its processes, JBS should focus on
planning processes and performance targets, and concerning the division of responsibilities for
strategic decision making, it would be preferable to apply a strategic planning style.

For a successful implementation it is critical for JBS to focus on performance management and
potentially formalizing the HR function. Additionally JBS could consider the benefit from an IT
system to support the export strategy. The capital is recommended to be obtained from sources with
low-medium risk.

It was also assessed that JBS’s managers should focus on the context it operates within in order to
design its strategic change program properly. The resistance towards change is especially an area
the managers should pay attention to when implementing the new strategic choices. It was also
pointed out that the managers should be able to adjust their management style to the specific
situation.

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7 Literature List
Books:

• G. Johnson, K Scholes & R. Whittington, Exploring corporate strategy, (Prentice Hall), 7th
edition, 2005

• G. Johnson, K Scholes & R. Whittington, Exploring corporate strategy, (Prentice Hall), 8th
edition, 2007

Websites:

• Sandal, G. Søndergaard, P. Risegaard & V. Krøyer, “Hvem er JBS”, 2008, reviewed May
2009,http://www.kommunikationsforum.dk/log/multimedia/PDF'er/Master-
afhandlinger/Hvemerjbs.pdf
• B2C superbrands, “Have a nice day”, 2006, reviewed May 2009
http://www.superbrands.easysite.org/files/jbs_4390.pdf

• Brancheorganisationen Dansk textil & beklædning, ”branche tal”, reviewed may 2009
http://www.textile.dk/Brancheinformation/Branchetal/Branchetal20032007

• Brancheorganisationen Dansk textil & beklædning, ”dollar-ugunst for JBS”, reviewed may
2009 http://www.textile.dk/Brancheinformation/Textuelt/Vis?id=313&date=10-03-2008

• Dahl Advokatfirma, reviewed the 22nd of May http://kortlink.dk/dahllaw/6mwv

• JBS website, Firmaprofil”, reviewed may 2009 http://www.jbs.dk/index.php?id=10

• JBS website, “Filosofi”, reviewed 22nd of may 2009 http://www.jbs.dk/index.php?id=28

• K. Stagaard, “Danske mænd stadig ramt af Björn Borg-bølgen”, 2008, reviewed may 2009
http://varde.kivanet.dk/scr.php?screen=article&i=8655

• Marketing in India, ”Price-point strategy”, 2007, reviewed May 2009

http://rajeshaithal.blogspot.com/2007/10/price-point-strategy_31.html

• V. Bjerrum, ”Modebranche i vækstvanskeligheder”, 2008, reviewed may 2009,

http://www.business.dk/article/20080728/design/80728084/

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 • W. Huitt, Maslow's hierarchy of needs, Educational Psychology Interactive. Valdosta, GA:
Valdosta State University, 2004
(http://www.dirkdavis.org/cbu/edu518/resources/Savage03/MaslowsHierarchy.pdf)

Other:
• Market analysis of underwear for men, A.C. Nielsen, 2006, from Danish Ministry of
Education, Erhvervscase 2. Juni 2008

• JBS videointerviews, JBS material from Danish Ministry of Education, Erhvervscase 2. Juni
2008

• JBS Annual Report 2007-08

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8 Appendix

5 Forces Overview JBS Classic JBS Fashion Dovre Egtved Marathon/Olympia

Threat of substitutes * ** ** * *
Threat of entry *** *** *** *** ***
Buyers' bargaining power *** *** *** *** ****
Suppliers' bargaining power ** ** ** ** *
Competitive rivalry *** ***** **** *** *****
Average 3 3 2,8 2,4 2,8

Future development multiplier 1,25 0,75 0,75 1,25 0,75

Long term market attrativeness 3,75 2,25 2,1 3 2,1

SBU Strength 4,5 1 4 2 3

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