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Value Chain Project
kvadrat
Group 21Louise Brink Skriver 1A
Lea Alison Sindel 1BJoanna Prazmo 1C
Zuzanna Martyna Strzemkowska 1DMaris Sepp 1E
Indhold
The textile market...............................................................................................................................3
Introduction....................................................................................................................................3
Problem statement..........................................................................................................................5
Methodology..................................................................................................................................6
Delamination..................................................................................................................................6
SWOT analysis...............................................................................................................................7
Inbound logistics............................................................................................................................8
Operation management...................................................................................................................9
Outbound logistics........................................................................................................................11
Marketing & Sales........................................................................................................................13
Service..........................................................................................................................................14
Support activities..........................................................................................................................14
Conclusion....................................................................................................................................15
Kvadrat.............................................................................................................................................16
SWOT analysis.............................................................................................................................16
Inbound logistics..........................................................................................................................17
Operation management.................................................................................................................19
Outbound logistics........................................................................................................................21
Marketing and sale.......................................................................................................................23
Service..........................................................................................................................................25
Support activities..........................................................................................................................25
Conclusion....................................................................................................................................27
Bibliography:................................................................................................................................29
The textile market
Introduction
The word “recession” is not something any company would like to hear. But it has been The
word of the new millennium. There has not been a person or a company that has not been
affected by it in any way. The Danish market for home textiles has not avoided it either.
Luckily, even though the hard data is showing a decline in the market for home textiles, these
facts are contrasted by the business’ overall optimistic view on the future prospects of the
development in the market.
The best opportunity for any textile market during the aftermath of the economic crisis is to
offer unique and sustainable products. Consumers are increasingly concerned about the
sustainability of the products they buy, while at the same time they want to distinguish
themselves by buying unique products.1 It all comes down to identity. Home décor is no
longer just about functionality. Home has become a place through which people will try to
express their identity, their taste, their status. This all can be achieved by choosing the right
furniture, lighting and of course textiles. Danish market for home textiles has not avoided this
general tendency. Within the last five to eight years the interest in home furnishing and
decoration has increased considerably among Danes2. Today, Danish television programs are
swamped with shows focusing on interior decoration, remaking of homes, and furnishing of
homes. Danes increasingly take greater interest in making their homes cozy and inviting. With
a greater interest in interior decoration and home furnishing, the focus on home textiles has
also increased.
Another factor influencing the market is the declining production due to strong competition
on the market which leads to manufacturers outsourcing their productions to low-cost
countries.3 Opportunities in this area could be found in specific market niches like using only
organic or Fair Trade cotton, focusing on sustainability, uniqueness or high quality
products/production.
1 CBI Market Information Database. Promising EU export markets for home textiles 20112 Home Textiles. A survey of the market for Home Textiles in Denmark3 Promising EU export markets for home textiles 2011
This is what Kvadrat is all about. Kvadrat is a brand name in a professional market where
quality and design are vital parameters. Kvadrat A/S is a leading textiles company,
specializing in the design and sale of high-quality interior textiles. In addition to designing
textiles for furniture and curtains, the company has extended its portfolio to include textile-
related products, while entering new markets such as the retail and shipping industries4. In
addition, the company’s product portfolio has been expanded to include textile-related
products: these encompass textiles for acoustics walls and ceilings, based on building
components which use tensioned textiles, known as ‘soft cells’, and which constitute a new
way of managing sound and acoustics. In addition, Kvadrat has started to sell whole products
– such as pillows and blankets – to retail companies, to enable it to increase its visibility in
home interior departments.
Kvadrat does not have its own production facilities, but instead concentrates on its core
competencies – namely, the design and sale of high-quality interior textiles. The company
operates on the basis of a strong service concept and short delivery times. Kvadrat is engaged
in the high and mid-end markets, largely in Europe, but also in other continents such as Asia,
Australia and the United States5.
A key element of Kvadrat’s strategy involves product diversification and market expansion
through partnerships. Kvadrat has initiated partnerships with Maharam, Fanny Aronsen,
Kvadrat Soft Cells and Danskina. Kvadrat is also involved in many different projects
collaborating with architects, designers and artists.
Despite the fact that Kvadrat has survived the recession and is optimistic about the future,
they still have to keep in mind that textile industry is very vulnerable – décor is one of the first
thing people cut back on when another recession wave should come. Also, as the expenses on
production go higher and the as the Danish market is overflowed with offers from Asia, one
has to always stay one step ahead and try to predict the future of the textile industry.
4 EMCC Case studies Textiles and clothing sector:Kvadrat, Denmark5 EMCC Case studies
This project will focus on the challenges and problem areas the textile industry is facing
regards to the value chain.
We will analyze the overall home textile industry and then look more deeply into Kvadrat as a
textile company and try to find the main challenges they face and will face in the future and
try to find the solutions for them.
The main challenges Kvadrat will have to overcome in the future may be: Changes in
external environment and company reactions – how well does the company respond to
changes they have no control over (recession, changing products according to trends –
sustainability, fashion etc.)
Challenges from customers – staying on the market as an high price high quality company and
not losing customers.
Challenges from competitors in the markets of different continents; the US and Asia
Changes in business approach – Engaging in the entire span of activities in the value chain
and working more intensively with suppliers on strategic initiatives. The largest part of
the actual product development is undertaken by the company’s suppliers.
Challenges in finding professional, trained specialists – especially in the retail, sales area.
Challenges in considering moving the production to China – if the pressure on prices
continues, the company needs to find a way to cut down the costs.
Problem statement
Describe and analyze the fashion and lifestyle industry and its development in general with
specific focus on the value chain.
Describe and analyze the company and its development in general with specific focus on the
value chain.
Regarding to the problem statement we first wanted to describe the market and Kvadrat in
general. Then we analyzed the value chain with useful models concerning marketing and
finances issues.
We did a conclusion on the market and Kvadrat framed the reason what makes Kvadrat a
good company.
The main question we focused on this paper was:How has Kvadrat overcome the financial crisis and secured a leading textile company role in
Europe?
How can Kvadrat be such a strong brand even though they are part of the B2B market?
What are the possibilities in geographical expansion to the Chinese market?
Methodology
This paper is mainly based on desk research but also field research in the form of visiting the
company. We gathered information from different webpages, which provided us with
financial information, as well as marketing information about the market in general and the
company Kvadrat.
The paper is based on the value chain model, but we also used financial statements, PLC
model and SWOT. These models are used to give an overview of the market and Kvadrat and
if the company still is growing in the future.
Delamination
In the paper we cover different areas within the market and Kvadrat A/S. what we chose not
to do was the Dupont model, instead we did financial statements that indicate the growth in
Kvadrat since the financial crisis.
We mainly focused on the European market because Kvadrat is the market leader in Europe
and most of their suppliers are from Europe. They are placed in other markets but the focus is
placed in Europe. We chose to highlight China as a possibility.
SWOT analysisStrength weakness
Aware of ethical issues - giving the industry a good reputation
Good quality in design and finished products
Environmental management6
Expensive production in the country The industry can be health damaging
to employees
Opportunities Threats Outsourcing More individualizing – trend
Financial crisis Laws concerning the pollution of the
industry Hard to negotiating about working
condition7
The SWOT analysis shows the strategic strength and weaknesses in this market of textile. The
Danish market has strength when it comes to do business with the global world. The Danish
companies are very environmental and care about ethical issues which result in good quality
in design and a great product. This gives a good reputation and a popular product all over the
world and is a reason for why the Danish market is one of the leading textile markets.
The weakness about the Danish market is the expensive cost in production. The Danish
market has a hard time competing in producing materials against the Asian countries. This
means that in this area the Danish market has a bad competiveness, this will result in
outsourcing the production and Danish workers will lose their jobs.
But outsourcing for a company will not be a bad thing; it can result in cheaper production and
saving money through the financial crisis. We already can recognize companies in the textile
industry outsourcing to countries as Pakistan and India because they can provide raw material
to finished material.
You also see different trends coming up in the textile industry, and the changed in trends can
either be good or bad thing for the industry. The Danish lifestyle has changed into a more
romantic way of decorating which have resulted in increasing sales.
The opportunities in the external market also give some threats that could result in difficulties
for the companies.
The financial crisis have affected all markets in general, and for some markets including the
Danish it has been resulting in more outsourcing to give lower cost expenses. Financial
crisis’s can also end in companies closing and damage the market share on the global plan.
Another that can damage the textile industry is the fact that is the most polluting industry.
6 http://www.danishresponsibility.dk/industry/162/introduction7 http://www.danishresponsibility.dk/industry/162/introduction
Laws against pollution can therefor damage the industry and the production in colored fabrics.
It is not only pollution that is criticized, the demand for outsourcing and cheap production in
the Asian countries often has its consequences. Asian countries often follow other rules when
it comes to child work and working condition, which the western world can find against the
human rights, thus regulation in the Asian countries could affect the cheap production and
maybe move the production or the production will become more expensive.
Inbound logistics
The textile market is a buyers’ market and Denmark is dominating it. Denmark is one of the
leading countries when it comes to the textile industry. 8
This gives some different options as you see in the SWOT analysis.
When it comes to production Denmark has a good infrastructure which could provide good
distribution system. Denmark has railroads, flights and good connections to the whole
country, which will result in perfect transportation, but most companies in Denmark chooses
to outsource, because of too high productions cost.
The textile market has most of its production in the Asian countries, e.g. India is a great
exporter to Denmark. India can provide everything from raw material to produced textiles.
Another country that is providing the companies in Denmark is Pakistan. Pakistan is an
upcoming country, which can provide low cost production and the materials the companies
need. China also needs to be mentioned because of the demand for cheap production.
The production is outsourced either because of financial crisis or because of cheaper
production.
Both things can go hand in hand, but Denmark is an expensive country to be producing in, so
in general the production of the market is outsourced to Asian upcoming countries.
With these different countries producing the Danish market receives different offers on
production. For instance, there is a great competition on the producers market and thus Danish
companies can have cheap suppliers. When it comes to dealing with the material and the
cheap work, Denmark often gives requires because of the reputation the country has, as being
aware of ethical issues such as child work. If something happens that the supplier will not
match the criteria it will damage the relationship the companies has together.
Choosing among the different suppliers is a process for each company, because you are
negotiating with different cultures. Danish companies are often deal focused whereas if you
negotiated with countries from Asia you will experience that they are more relationship
8 DIPO – a survey of the danish home textile market
focused, this will result in good partnerships with the supplier. In order to find the right
suppliers to negotiate with, there are hold fairs, where you meet the companies and suppliers.
Here you will learn about the raw materials that can be provided and you will start building a
relationship with a future exporter or importer.
The delivery of textiles will be in Denmark ready to be worked with the designers and other
parts of the company’s processes. Then it will be sent to a retailer and sold to the costumer.
Thus, the market in Denmark has lot of intermediaries before it is actually sold.
Operation management
Operations management, according to a book Production and Operations Management,
designs and operates productive systems. This term can cover “the planning, scheduling and
controlling of the activities that transform inputs by way of raw materials, capital, machinery,
labour, information and also time into outputs in the form of products and services of higher
value than the inputs.” Moreover, the operations management may mean the value addition
process.
The operations management is extremely important in overall competitive strategy of the
company. It should be structured in such a way that the efficiency of the company is
increasing constantly. This strategy should be led to develop the company’s position in
textiles market. The operations management carried out by companies are to make them more
powerful, stable and wealth. Some companies come to staff redundancies when they face
financial problems, to improve the situation. According to telegraph.co.uk, due to the
economic crisis in the UK in 2008, by December “British companies had confirmed the loss
of 154,266 jobs since October”. On 9th January 2011 business community, Huntsman
Corporation will lay off 470 employees. Lay off part of the buyout of the company’s overall
Apollo RBI Limited a part of the production of textile dyes and chemicals. 9 On 14th May
2008 Bay Trading, the fashion retailer, cut 15000 jobs globally.
Other ideas that companies have to improve their position are getting employed new,
qualified workers or train the present ones. On 21st February 2012, the company called Cedro
Textiles Company, “one of the largest textile factories in Brazil, has hired HTP Solution
consulting services to analyze its e-commerce strategy”.10
9 http://textileindustry.info/Enterprise/Huntsman-Corp-for-the-textile-dye-unit-redundancy-5182.html#.UJMMZ2_A91o10 (http://www.htp.com.br/News.aspx?Code=76&ParentPath=None&ContentVersion=R
Each company has its own strategy of retention and profiles of workforce. They are different
in the proportions of male and female workers, their health, ages, provenances or even
religion. In Indonesia women make up 70-80% of the textile and garment industry. The ideal
woman worker, according to a well-known saying in Indonesia, is "takut dan malu" or
"fearful and shy". 11
There is another example of the company which hires only certain kinds of people.
The company did not have a training program. According to California Fatality Assessment
and Control Evaluation (FACE) Project, there was one anonymous in the investigation, which
only hired people with experience in the textile industry.12
The product development and innovation is crucial for any company to be wealth. The
companies should concentrate on clients’ demands and to satisfy them. That is why it is so
important to keep the quality of products at the high level. There are many processes used by
a variety of companies to produce certain-quailed products.
For example, the Armed Forces Awards LLC specializes in the design and manufacturing of
awards, equipment, and signs found only in our military. Almost every product, which they
sell, is hand-made. This, as Matthew and Andrea Moore (formers) claim, guarantees against
defects in design and craftsmanship. Your satisfaction is our primary goal13
As time passes, they have also to innovate themself to keep on the track. Reebok, the
company producing sportswear, invented shoes which stimulate the contraction of muscles of
the body’s down part.
The company from New Zealand, called Wear Like Me, announce on its website: “We
continuously develop our products to make them even more comfortable and durable. That is
why our boots feel great from the moment you put them on. We set up our collection with a
wide range of models for every taste and occasion.”14
Every company meets some challenges, which may contribute even to the deconstruction of
the firm. They are economic crisis, competitors or criticism. Companies try to cope with
them in several ways. Some of them even to get the product of from sale. This is what the
“Ikea faced during its latest controversy about the foreign operations after it emerged it had
removed images of women from its famous annual furniture catalogue in Saudi Arabia”15 . It
11 http://www.angelfire.com/pr/red/feminism/globalisation_ss_indo_women.html12 http://abcnews.go.com/WN/software-company-hires-people-autism/story?id=10260617#.UJJfqG_A91o13 http://www.armedforcesawards.com/ProductsPage.htm14 http://wearlikeme.com/product-information/15 http://www.ft.com/intl/cms/s/0/6da1abf2-0bb8-11e2-b8d8-00144feabdc0.html#axzz2B1LsrG3u
happened in late September 2010, and such a storm of abuse fell onto the company’s head.
Consequently, Ikea said they regretted the airbrushing. It was firstly reported by Sweden’s
Metro newspaper, and included a bathroom scene of a mother, father and child. The woman
was removed from the Saudi catalogue. The company added it did not “accept any kind of
discrimination”. What is more, they claimed it would review the way it produced its annual
catalogue.
Outbound logistics Distribution:
Home textiles are imported from all countries from all over the world as well as made in
Denmark. This is how Denmark can offer their customers different kinds of materials with
different prices. 16 If the price is higher people expect better quality from the product. When
the price is low, people accept simple standardized product which is not necessarily
fashionable but functional. We can divide home textile market into the low-end (low prices
and low-quality), high-end (high price and high quality) and middle market segment (in
between). 17
Some of the biggest Danish home textile manufacturers are making their products at their own
production facilities in Denmark. Other manufacturers have located their production facilities
in Asia or East Europe because of lower production costs.
There are also many foreign suppliers who want to start businesses in Denmark. Danish
importers can choose among many qualified suppliers.
In the distribution chain, purchasing agents are one of the most important agents who work
for importers and retailers. They have numerous contacts and knowledge’s of the foreign
market. They purchase on the request of their customers. Danish wholesalers import ready-
made home textiles and home textiles manufactured. They operate with mark up between 40-
70%.18
In Denmark home textiles are sold through different stores: furniture stores, concept stores,
department stores, supermarkets and shops specializing in home furnishing. Retailers buy
textiles mostly through purchasing agents or wholesalers. Some of bigger retailers buy from
foreign manufacturers or have their own purchasing offices abroad. 19
16 Danish Import Promotion Office for Products from Developing Countries; Home Textiles; A survey of the Market for home textiles in Denmark.17 CBI, Ministry of foreign affairs of the Netherlands; Trends and segments for home textiles.18 DIPO; Home Textiles; A survey of the Market for home textiles in Denmark.
19 CBI, Ministry of foreign affairs of the Netherlands; Trends and segments for home textiles
Prices:
Textile market belongs to competitive sector that’s way pricing is very important in market’s
strategy. Prices in home textiles depend on a type of a product, its quality, design and how
this product is available in global market. Price also depends on the raw material which the
product is made of.
Home textiles market can be divided into three price sectors: high, medium and low.20
Medium sector contains also high and low segment.
High-end segment is based on luxury product with high quality and brand name. Designers
take care of fashionable colours and quality of materials they use. The most common is silk.
Cotton seems to be one of the most popular in this segment. Products are sold in exclusive
shops or designer stores.
Middle-high segment is characterized by good quality product for reasonable price. Products
often follow market trends; some of them have brand names. They fallow common trends,
colours might change during the season. These products are sold at department stores or
independent retailers.
In middle-low segment price is an important aspect of the product which quality is basic.
Products still follow trends, but they are standardized and their colours are very limited.
Manufacturers of these products are trends followers, they copy designs. These products can
be sold at department stores or in private label stores.
The last category is low-end cheap. Products that belong to this category have low quality for
low prices. These products are in variety stores, discounters and grocery multiples. They are
standard, not fashionable and they don’t carry brand names.21
Transportation
Some of companies locate their activities in other countries to have closer contacts with
customers, especially in the furniture industry. Partnerships with companies from different
countries help to win over foreign markets and control competitors.
Organizing activities, companies take into account both geography and market segments such
as cruising segment and hospitality segments. 22
Most suppliers of Danish companies are located in Europe. East- European countries are
more reliable than developing countries- transportation time is shorter and cheaper.23
20 CBI Ministry of Foreign Affairs of the Netherlands; Prices and price developments for home textiles21 CBI Ministry of Foreign Affairs of the Netherlands; Trends and segments for home textiles22 European Foundation for the Improvement of Living and Working Conditions; EMCC. Case Studies. Textiles and clothing sector- Kvadrat, Denmark.23 CBI Ministry of Foreign Affairs of the Netherlands; Trends and segments for home textiles.
Marketing & SalesObserving Marketing in the Home Textile Industry, it is important to consider that there are
two different kinds of markets: The business to business and the business to consumer. In the
B2B market the focus is on the company and the product and not on the brand which means
that a public promotion campaign isn’t necessary. This is concerning, as an example, in the
furniture textile industry. There are however, companies in the Home Textile Industry, which
are eg. producing bed linen, where promotion is more important because it is a B2C market.
Important, regarding to the marketing is, to consider the trends of price, quality and
distribution channels. All of these trends are depending on the changing demands of the
particular target group. Nowadays, we have a strong movement of the consumers towards
product awareness.24 A good quality of the textiles is becoming more and more important to
them. Furthermore, individualization is one of the mega-trends of our time and that is
changing all the different businesses which are buying home textile. Hotels, for instance, are
no longer seen as merely a collection of rooms which means that the furniture is no longer
only monofunctional.25 Neither is the furniture in offices, which means that textiles materials
are expected to absorb light and sound to play an active role in enhancing the atmosphere of a
room.26
Regarding to this individualization of society and individuals, the marketing of the Home
Textile is reacting not only in the products but in all the 4 P’s (product, price, promotion and
place). For instance, the price of the products is rising because of the increased expectations
on quality. This is possible because the salaries in the main market, in western Europe, are
still rising about 3% each year and the ‘upper class’ is growing.27
Because of the variety of the different fabrics, designs and qualities in this industry, the price
elasticity of demand is high when it comes to textiles.28 Certainly, it is higher for a well-
known B2C brand then it is for a B2B supplier.
Moreover, especially in a B2C market, the place becomes important. Almost every consumer
now is demanding the possibility to be able to buy online. That applies to the Home Textile
Industry too. Although, it is to say, that most of the Home Textiles are distributed through
retailers and wholesale companies.29
Regarding to the sales, there is again a difference between the 2 different markets. The B2B
business is mostly relying on partnerships with different furniture companies, retailers or
24 Management Report Individualization and the new identity markets, Zukunftsinstitut Kelkheim Germany25 Management Report Individualization and the new identity markets, Zukunftsinstitut Kelkheim Germany26 Management Report Individualization and the new identity markets, Zukunftsinstitut Kelkheim Germany27 www.statista.com/statistik/daten/studie/206792/umfrage/prognose-zur-gehaltsentwicklung-in-westeuropa28www.smera.in ‘RATING CRITERIA FOR TEXTILE INDUSTRY’29 http://www.fibre2fashion.com/industry-article/14/1399/denmark-a-promising-market4.asp
wholesale companies. Therefore they employ special sales persons who are supposed to build
and cultivate these relations. This partnership stands for long term orders, which means for
the company a certain financial security. A favored way of getting in contact is at the trade
fairs. Home Textile companies are visiting different trade fairs all over the world to meet with
potential suppliers and to get an impression of the possibilities in the market.30
Service
As for every company nowadays, it is important to have an appealing web site for every
costumer and possible costumer. By observing differed web sites of the Home Textile
industry, you can see that they are emphasizing the environmental policy of their company
and the longevity of their products. Nevertheless, trade fairs are still the most important tool
to hand out the most important information to the costumer.31
Companies, which are producing for example, textile for furniture, are sending an annual
sample book to their buyers. By doing this, the purchaser can have a first look at the new
product regarding to color and quality.
Support activities
Company’s support activities include procurement, technological developments, human
resource management and firm infrastructures. All these activities support and are part of the
main activities. They all differ in every company and are the core part of company’s heart.
Procurement includes activities related to purchase of products, i.e. Choice of suppliers,
ordering etc. Here a company needs to decide if they produce their own products or use
suppliers. They also need to decide which suppliers to use – is the price or quality priority, if
using outsourcing is the right decision etc.
Technological developments are activities that ensure efficient machinery and efficient
processes. Here a company needs to make sure their equipment is up to date and is at its best
efficiency.
Human resource management includes activities like recruitment, training, motivation and
payment of management and ordinary employees. In the textile industry, the variation of
people is wide – companies need designers, purchasers, marketing people, customer service,
warehouse workers and many more. Some jobs are very specific, depending on the company
there may be a need for scientists to perform different tests on the fabrics or create new
colors. Finding and training these people is up to every company. The same goes to
30 A survey of the market for Home Textiles in Denmark, DIPO31 A survey of the market for Home Textiles in Denmark, DIPO
motivation and management. Every company has their own company culture – it can be very
hierarchical or the opposite - very open and free. There are own rules and traditions and they
all vary. Every company has their own little eco system.
Firm infrastructures are the activities that support the other 8 value chain activities. Firm
infrastructure includes: Management, planning, quality control, finance, management
accounting etc. This includes all the activities that make sure the company actually works –
from budget checking to finance management.
Conclusion
The aftermath of the economic crisis has brought new demands for the textiles market; one of
them is to offer unique, sustainable products. Being “green” and original is the future. But
producing high quality products is expensive and the Danish market has a hard time
competing in producing materials against the Asian countries, this forces Danish market to
outsource their production. Though outsourcing could lower the price of the production, it
could also lower the quality, which is something most companies are not willing to do. So
moving to Asia has both pros and cons, every company have to decide if it’s beneficial
enough.
Outsourcing or not, the textiles market is a buyers’ market and Denmark is dominating it.
There is a great competition on the producers market and thus Danish companies can have
cheap suppliers, it is just a matter of choosing.
There are two different kinds of markets in the Home Textile Industry: The business to
business and the business to consumer. There is a strong movement of the consumers towards
product awareness. A good quality of the textiles is becoming more and more important to
them. Furthermore, individualization and being unique is one of the big trends of our time.
Even though trends in the textile industry do not change as fast as in the fashion industry – the
companies still need to be up to date with new movements, perfect place for that are the trade
fairs where all the new and best products of the companies are presented.
For the regular consumer, the new trends and products are seen in retail stores or online. More
and more consumers are expecting to be able to buy products online. That puts pressure on the
textile companies to keep their e-businesses current and always up to date.
Though the textile industry is still trying to recover from the recession and is trying to find
the balance between a good price and quality ratio, the companies themselves see the future
brightly and hope that focusing on sustainability, originality and high quality is the answer to
being successful.
Kvadrat
SWOT analysis
Strength Weakness
Market leader in Europe
Strong on design and quality
Low level of competition
Design culture
Environmental products
High prices
A demanding target group32
Opportunity Threats
Chinese market Standardization
Financial crisis
Kvadrat has a lot of strengths within the company. They are the market leader in Europe at a
market that is partial monopolistic. This means that there is not that much competition, but the
weakness of high prices might cause a problem, since the other competitors might offer
cheaper textile solutions.
Kvadrat has a brand of good quality and strong designs. The work with designers pays off in
the creativity and design culture.
The products are environmental and you see in remote environment that this factor is
becoming more and more a trend, and Kvadrat offers good environmental products so it meets
the customers’ demands.
The target group that Kvadrat has is a more demanding target group, which can be seen as a
weakness. A demanding target group means that Kvadrat really has to offer something special
not only in products, but the products must be a part of an experience. This means that there
can be a greater cost in marketing communication.
When it comes to the external part of the SWOT analysis, there lays an opportunity in the
Chinese market. Today the Chinese market is a very attractive market to enter. The 32 http://www.ebst.dk/publikationer/vaekst_via_oplevelser_cases/html/full_publication.htm
production cost can be lower, but it also demands some changes to meet the customers’
demands e.g. standardization, which it not something Kvadrat has been doing and can thus be
seen as a threat to the company.
Financial crisis in the total market will affect the company. When the financial crisis started
back in 2007 the company was doing great, but from 2007 – 200933 there has been a great
downfall in
profit of the
year.
In 2010 they
have
managed to
snap out if it
and get a
higher profit of the year.
When you look at the
revenue from the European
market and the other
countries that they are
progressing. This shows
that Kvadrat is aware of cultural barriers and has good experiences with new markets.
Also the profit of the year has been growing from 2010 till 2011. This shows that Kvadrat
overcomes financial crisis and still remains balance in their finances. So the money for a new
market could be found and the experience with cultural barriers gives a good experience
Inbound logistics
The inbound logistics of Kvadrat consist of a few suppliers. Most of their suppliers come
from Western Europe but they are looking into the Chinese market.
Their products are sent directly from the production to the headquarter in Ebeltoft Denmark.
Kvadrat is not a productions company, they see opportunities in the Chinese market but that
33 Financial report 2011
would mean they would have to start a production there as well.
Kvadrat does not operate much with the activities in the value chain, but going to the Chinese
market would change that.
Kvadrat has built a good relationship with the suppliers they have, which means that they
understand the needs and demands from Kvadrat. The reputation of Kvadrat is important and
means a lot for the company thus they are depending on their suppliers.
The textile industry has a great focus on the environment. Every second year they check their
suppliers if they live up to the standards that are needed. Because of the long term
relationships the suppliers are committed to do their best in reaching the best quality and
minimize the environmental impact. 34
Kvadrat has different markets all over the world and companies placed around the world
including showrooms. This gives Kvadrat different markets and more markets to supply, but
their production remains as always with few suppliers so they keep their good reputation of
quality, design and environmental products.
Their quality level is high because of their good cooperation with their suppliers. They e.g.
use a supplier in London, where they bought 30 % of the company, to make sure the company
will exist for a long time, so they can work together and can be provide the fabrics they need. 35
If you look in their balance sheets from the recent years you will see a growth in trade
payables, but a fall in payables to group enterprises, which could be because of the way they
buy shares in cooperating companies/suppliers. You will see from the financial report that
they get a good share of the profit from the cooperating companies, so the way Kvadrat
handles their suppliers and cooperating companies is turning out to be a financial success.36
During the years Kvadrat has felt competition on the prices. It happens when they convert to
new cultural segments and when competitors offer cheaper textiles. Kvadrat does not have a
lot of control of the logistics in the value chain, but they might have to change this to be able
to offer lower prices and reduce their suppliers. Going into a Chinese market will help lower
the production cost, but the target group in the Chinese market does not meet with goals of
Kvadrat. Chinese market might demand standardization, but Kvadrat represents creativity in
their design, so standardization in their promotion and maybe designs might be difficult. 37
It is not only the suppliers that are in focus, packaging is also an important thing for Kvadrat.
At their warehouse packaging and quality control take place. 34 http://www.kvadrat.dk/fileadmin/user_upload/downloads/Maintenance/Textile_information_UK_02.pdf35 Meeting at KVADRAT36 Financial report 201137 The_Chinese_Challenge_master_thesis_by_Trine_Hansen.pdf
Kvadrat is an ISO quality member and thus receiving their products you know they are of
good quality and environmental as well as their packaging.
Operation management
The training strategy of Kvadrat plays an important role. Kvadrat has changed the
organization which was to increase the efficiency in many different parts of it. However, this
has never led to staff redundancies, but employees have either been given responsibility to
carry out new tasks new kinds of tasks and their functions have been changed. These
employees have been prepared for it by undergoing several trainings.
In general, Kvadrat depends mainly on the highly qualified workers, who are employed
throughout the entire organization.
Educating and training for the employees is extremely crucial, predominantly at managerial
level. A great attention is paid to both further education and to development of a common
management language.
Each worker gets an educational plan. The main part of involves training in ICT, languages
and communications. As addition, Kvadrat constantly works on informing all employees
about the company’s strategy. As an example workshops and seminars can be mentioned.
They are measured annually.
Kvadrat has its own educational academy, which was established 5 years ago. It seeks to
recruit, train and retain employees. Above all, the company pursued to limit “the timespan
between hiring a new salesperson and ensuring a high level of performance.” 38
The academy uses both internal and external teaching resources. What is more, new
employees within the company’s sales division have to undergo one year of training at the
academy.
Kvadrat is doing its best to keep the equal number of male and female workers. Its aim is to
maintain a good balance so a policy is not explicitly pursued. Moreover, the proportion
between Danish employees foreigners has been 75 to 25 since 2003, now it is 65 to 35 today.
On the other hand, the company “bases its recruitment criteria on finding the best qualified
employees for the job”.39
Kvadrat is an outstandingly great company in terms of technology and innovation, sales and
marketing. However, the ratio of high formal qualified employees is relatively low and is not
increasing. The company does not call itself as a knowledge-intensive. During the recruitment
38http://www.eurofound.europa.eu/pubdocs/2008/472/en/1/ef08472en.pdf 39http://www.eurofound.europa.eu/pubdocs/2008/472/en/1/ef08472en.pdf
actual competencies are more worthy than formal qualifications. Many employees are self-
taught with exceedingly relevant prior capability.
Work in this company is not the best-paid, however Kvadrat has a little staff turnover. On
average the seniority is about 8.5 years among Kvadrat’s personnel and 15 years among chief
management. Instead of increasing employees’ wages, it prioritizes and “offers good health
insurance, flexible working conditions and a favourable working environment, along with
other benefits such as employee bonds, and education and training measures.” 40
The Kvadrat’s strength in competitive world of the high-ended markets is attributed to its
instant delivery of sophisticated products. Thanks to it, the company needs to be innovative
all the time. This innovation concerns both company’s processes and products.
There are four employees in Kvadrat, who coordinate and manage projects within the product
innovation division. The company’s suppliers are responsible for the main part of the actual
product development. Both Kvadrat and its suppliers introduce new ideas for product
development. Moreover, Kvadrat works with highly-qualified external professionals, who
improve the product. Most of them are designers, but there are also experts such as
nanotechnologists.
Apart from this, the company teams up with strategic partners on a regular basis, developing
completely new products which involve new applications of textiles. The examples are as
follow: Soft Cells and North Tiles. The latter has even been performed in Museum of Modern
Art in New York as the design collection.
The macroeconomic fluctuations have mainly influenced the Kvadrat specifically and on the
textiles sector. The greatest impact is visible as the change of activity levels in the
construction sector. Correspondingly, Kvadrat claims that macroeconomic development
stands for the biggest future challenge which company is to face. During the last economic
downturn in the construction sector, Kvadrat carried out the offensive strategy. It invested and
prepared for an expected improvement, which now seems to have paid off.
Even though Kvadrat claims its vigorousness, it tries to expand it into other areas,
consequently making it more powerful to changes in the external environment.
Frequently, Kvadrat alters its products to follow trends in fashion and taste. What is
interesting, the environmental issue, political program and customers’ demands are expected
to become an important priority.
In advance, Kvadrat’s products are sustainable and environmentally compatible. It gives the
company the control over its suppliers. Moreover, Kvadrat is documenting and exploring
40 http://www.eurofound.europa.eu/pubdocs/2008/472/en/1/ef08472en.pdf
various proactive ecological initiatives. Therefore, the company’s environmental strategy has
two aims. The first is to observe to and forestall present and future regulations by ensuring
and documenting high standards in the entire value chain using numerous certifications.
Another is to demonstrate an innovation in this field so as make the company’s ‘green image’
more powerful.
Outbound logistics
Kvadrat has a leading position in Europe market. Company sells its products throw different
companies all over the world, mostly through two associated companies Kvadrat Soft Cells in
Denmark and Kvadrat Maharam Pty Ltd in Australia; and showrooms located in the large
European cities such as: Madrid, Berlin, London as well as in Tokyo, Sydney, Shanghai and
New York. 41 The main reason that company decided to locate their activities in different
countries is proximity to the customers. It is also important for one of the Kvadrat’s value
which is short delivery time.42
Kvadrat doesn’t have their own production facilities but cooperates with several suppliers
from Europe due to their similar culture, good communication and close distance. Company’s
strong position on textile-market is the result of having good relationship with their
customers. They have many employees who have long-term relationship with the architects
they visit.43
In 2003 Kvadrat started partnership with Maharam in the US. It helped companies enter
American and European companies. Kvadrat has agreed on marketing of American textiles in
the European market while Maharam agreed to do the same for Kvadrat in the US. This
partnership allowed Kvadrat to enter the American market and what’s more important it
helped to control one of the biggest competitors from the US. This collaboration gave
Kvadrat access to information about market and product development. It also enabled
Kvadrat to enter Japanese, Australian and Korean markets.44
Kvadrat has Special Designs Department responsible for different orders. Kvadrat
collaborates with strategic partners on developing innovative textiles. Their special collection
has been accepted in the Museum of Modern Art in New York. They also designed chairs in
opera house in Oslo where each of chairs were made of different colours application on
41 Interview with the company42 European Foundation for the Improvement of Living and Working Conditions; EMCC case studies. Textile and Clothing Sector: Kvadrat, Denmark43 Interview 44 European Foundation for the Improvement of Living and Working Conditions; EMC case studies.
textile.45
Kvadrat has a small laboratory where the quality of all materials from suppliers has been
tested. If the quality of the product is not satisfying then they decide with supplier how it
should be redone. Kvadrat decides which designs are for hotels, lobbies, offices, ships,
interiors etc. Tests are made according to different level of standards.
When all tests are done, the results are sent to Copenhagen where the reports are made.46
The warehouse consists of three halls with different kind of textiles. All orders are measured
and cut there. After they go to the packing department and sent to the right track. Kvadrat is
able to deliver approximately two hundred meters on the same day.47
In the sample department there are rugs, curtains, and pillowcases etc. which are sent directly
to the client who ordered them.
Then the finished fabric is send to Kvadrat. From Kvadrat all the textiles are sent to the
customer by tracks, ships or aircrafts.48
Just-in-time delivery of first quality products is a key position in Kvadrat’s mid and high-ends
markets. Kvadrat deliveries are covered by the Danish sale of Goods Act. Kvadrat doesn’t
accept any terms of sale stipulated by the buyer before of after the issue of order confirmation,
unless confirmed in witting by Kvadrat. Offers made by Kvadrat are valid for 90 days from
the date of the offer. The order confirmation and general terms constitute the purchase
agreement between buyer and Kvadrat.
All prices quoted by Kvadrat reflect the limited liabilities of company. If a buyer wants to
deal with Kvadrat on other terms that those general, this may be agreed separately.
When the purchase price is not mentioned in the order confirmation, the proper price applies
on the date of delivery. Kvadrat may change a price of a product in case of unforeseen
circumstances for ex. increase in the price of raw materials, direct and indirect taxes, etc.
The buyer is obliged to examine the products carefully and to describe any product defect (if
there is any) no later then eight days from receipt.
Kvadrat terms of payment are 30 days from the date of the invoice.
The company has no policy of accepting returns and cancellations other than for good that
turned out to be faulty. Kvadrat is not also responsible for any damage or default suffered by a
buyer. Defect liability period expires 12 months after the date of delivery. Kvadrat is not
liable for any defects resulting from transportation, storage, faulty treatment. It is liable for
45 Interview 46 Interview 47 Interview48 Kvadrat Environmental Compendium
damage caused by defective products in accordance with the provision of the Danish product
liability act and the unwritten rules of product liability.49
Marketing and sale
Speaking about the marketing of Kvadrat, one has to say that the market of Kvadrat is a
Business to Business market. Primary, they are selling their products to architects and
furniture companies but also to retailers. Consequently the main target group is architects,
furniture companies. Nevertheless, the usual saying for a B2B market: “product no brand”, is
not quite applicable for Kvadrat. This is recognizable by looking at the marketing of this
company.
Kvadrat’s traditional product range is of high quality furniture fabrics based on good,
European craftsmanship. The company is purchasing some of the same designs as for 40 years
ago but still continually expanding their product portfolio.50 For developing a new way of
managing sound and acoustics, they designed the so called “soft cells”, which are
encompassing textiles for walls and ceilings.
This was one of the first steps the company made towards their goal to develop more modern
textiles for their target group. It includes the architects as well as the consumers at home.51
That is because they have also added pillows, blankets and curtains to their product range, in
the last 10 years.
Furthermore, they are doing ship interiors and any kinds of special orders, such as special
patters or fibers of the fabrics.
About the distribution channels of all these different kinds of products it is to say, that 100%
of it used to be a contract business but now almost 50% of it is through their E-business.
This E-Business is linked to their web-side and companies who want to order can easily log in
and order the fabrics they need. This is pleasant for the costumers and at the same time,
helping the company to save money on employees. Moreover they have showrooms all-over
the world, not to distribute their products directly, but to inform the costumers and to give
them the possibility to actually “touch” the fabrics. For their showrooms, they hired artist to
design the interior, to create a unique impression for the costumers.
This special concept leads us to the probably most important division of marketing: the
promotion and the branding. Since Kvadrat is a B2B business they don’t use advertisements
49 www.kvadrat.dk50 EMCC case studies, Textiles and clothing sector: Kvadrat, Denmark51 EMCC case studies, Textiles and clothing sector: Kvadrat, Denmark
in magazines or newspapers but finds different ways to promote their brand. One way is, for
example, how they are presenting themselves on their web-page.
The part, they are concentrating on the most is their environmental policy. They are saying
they are environmental friendly and sustainable, which is becoming more important for
consumers nowadays.
By declaiming to high standards in the value chain, which are checked regularly by both; the
employees of Kvadrat and independent organizations.52
Due to this, Kvadrat is getting a “green image” which conduces to the success of the
company.
The other image they are trying to give is that Kvadrat is connected to art. One can already
see that by visiting the company in Ebeltoft, Denmark. For instance, they hired an artist to
rearrange the surroundings of the company and ad some land-art pieces.
Furthermore, Kvadrat is sponsoring well-known artists with their fabrics. This must,
however, be seen as a profitable promotion deal for Kvadrat and not as some kind of charity.
This means not only a big PR effect for the company but also awareness in different ways
their textiles can be used.53
The most important factor is that they are building a connection between Kvadrat on one side
and art and design on the other side. This is very useful for the company’s goal, to be among
the best companies of the design business. In consequence, you can see that Kvadrat is not a
normal B2B company which relies only on the product and not on the brand.
Regarding to the sales strategy of Kvadrat, it is to say that the most important part of it are the
sales people. The sale staff is regularly visiting the costumer of Kvadrat; architects, designers
and furniture companies. Furthermore, they are inviting them to their head-office in Ebeltoft.
In terms of having qualified employees, who can answer all the questions of the customers
and understand the cultural and creative context of the products, they have a special training
for them in design, architecture and art history.54 Kvadrat is saying that having so many sales
men is their key to success because they are able to keep a direct relationship to their
customers although nearly 50% of their business is handed online through e-commerce.
Besides the E-Business they have the contract-Business. Especially long-term collaborations,
which Kvadrat has with European furniture companies, are based on these contracts.
52 www.kvadrat.dk53 Interview med Anders Byriel, ADM. director54 http://www.stylepark.com/en/manufacturer/kvadrat
ServiceKvadrat is offering a lot of services to their customers, which is necessary to maintain their
leading position in the furniture textile industry. They are not only offering an end-to-end
service, but also certain “specials” for large orders.55 These “specials” are to get, besides of
the 160 designs and 3200 colors Kvadrat is keeping in their product range, unique colors, cuts
and weaves. Another service is the showrooms of Kvadrat which are spread all over the
world. Here everybody can get information and counseling about the products. Moreover, the
showrooms are a possibility for the visitors to see the different fabrics regarding to quality and
color. In addition, Kvadrat has a sample department which is taking care of sending sample
books to their customers. This sample books are free of charge and useful for designers and
architects to find the fabric that they are looking for.
Furthermore, they are able to send 93% the orders56, on the same day they are getting it, from
their warehouse in Ebeltoft to the customers and manage it to deliver 98% of the orders in
time. However, were a company probably finds all the services Kvadrat is offering, on their
web page, is also important. Regarding to that, one can say that Kvadrat’s web page is clearly
arranged and is containing the access to the e-commerce, their mission and a search engine for
all the fabrics they are offering.
Support activities
Procurement includes activities related to purchase of products, i.e. Choice of suppliers,
ordering etc.
Suppliers
Today, all products automatically go directly from the suppliers to Kvadrat’s warehouse in
Ebeltoft. The aim is to reduce this flow to 50%, implying that the remaining 50% will go
directly from the suppliers to the customers. This represents a significant challenge in terms of
quality assurance, involving a complete change in well-known and solid procedures, as until
now, all products have been quality controlled in Ebeltoft.
Kvadrat believes in long term partnerships. To them it is important to sustain good
relationships and to always get the same result in product quality.
Kvadrats suppliers are mainly from Europe. As there isn’t any production taking place in their
company, Kvadrat had suppliers in different European countries. They choose people who are
best at producing specific product. They explained that the reasons behind this are similar
55 www.kvadrat.dk56 www.kvadrat.dk
cultural background, closeness and same understanding of quality, time and business. Kvadrat
is looking for security; they need to know that their suppliers exist also in 10 years.
Almost 50% of the ordering takes place via e-business. Products will be shipped the same day
if the order is placed before 2pm. Kvadrat takes pride in their fast delivery, 98% of the
deliveries are on time.
Quality and product control
Kvadrat is known for the quality of their product and so they put a lot of emphasis on the
quality control. They make audits and check-ups to their partner companies and suppliers to
make sure everything is done on the highest quality. There is also quality testing taking place
in labs inside and outside of Kvadrat. Different tests are done with the fabrics to decide their
usage and purpose (home textiles have other norms than textiles for hotels and offices).
The quality of the fabrics is also tested as soon as it arrives to Kvadrat. Textiles are given a
quality level A, B or C. A is the highest level and C is the lowest. The fabrics are checked for
color, thickness and quality faults. Every new incoming fabric is automatically given a C
level, then after proving its consistency for some time, the level can be upgraded to B and etc.
Technological developments are activities that ensure efficient machinery and efficient
processes.
Kvadrat does not have its own production facilities as such, but relies heavily on high quality
suppliers. The machinery used in Kvadrat is mainly for packaging, cutting, measuring etc. All
the textiles arrive to Ebeltoft ready to be measured and cut.
The efficiency of the machines is checked regularly and if it is dated/old fashioned it is
replaced with a more modern version to keep the quality and efficiency high.
Human resource managements are activities that include recruitment, training, motivation
and payment of management and ordinary employees.
Educating and training the employees is highly prioritized, particularly at managerial level,
where an emphasis is placed both on further education and on developing a common
management language. Each employee is assigned an educational plan, the main part of which
involves training in ICT, languages and communications. Moreover, Kvadrat continually
works on ensuring an awareness of the company’s strategy among all employees – for
example, through workshops and seminars – which is measured annually. Some years ago,
Kvadrat established its own educational academy, which seeks to recruit, train and retain
employees. In particular, the company sought to reduce the time span between hiring a new
salesperson and ensuring a high level of performance. The academy offers tailor-made
programmes to the employees, using both internal and external teaching resources, and new
employees within the company’s sales division are required to undergo one year of training at
the academy57.
Kvadrat has 130 employees in Kvadrat and around 200-300 in the world. They are proud that
their firing level is very low and even during the recession; they had to let go only 10 people.
Kvadrat is also Denmarks healthiest company according to the prize they won this year.
Kvadrat is constantly promoting healthy lifestyle inside of the company – there is a gym for
the employees; the food in the canteen is always healthy, they also take pride in having a good
welcoming environment.
The company’s culture is very free and open. The building itself in Ebeltoft is modern and
uses open planning – most offices are very big and joined together. The company doesn’t
have strict clothing policies – people dress casually.
Employees are also very free to work on different projects and do collaborations with other
departments.
Firm infrastructures are the activities that support the other 8 value chain activities.
On location, the company’s organizational structure is very ‘flat’, and Kvadrat does not
manage on the basis of rules and policies. Instead, all employees are made aware of the vision
and objectives through the company’s strategy, which helps guide their actions, reducing the
need for instruction58. Every employee is aware of their responsibilities and goals, but they are
also free to work on other projects if they wish – company supports creativity and new idea
developments.
Kvadrat is very keen on keeping all their employees happy and comfortable - so if necessary,
they meet the people half way. For example – when someone needs to move abroad for a
while, the company tries to find a way they could work from abroad, not just fire the person.
Conclusion
Kvadrat is the market leader in Europe in a partial monopolistic market. There are a few
competitors but they will have a hard time taking Kvadrat’s role in the market.
Kvadrat strength lies within the fact that they have no production but only a warehouse, this
means that their corporations with suppliers are good and they only choose the suppliers that
can provide them the best fabrics.
Kvadrat is mainly a B2B company but them also sells to private clients. They work within
textiles and in providing a creative design that differentiates them from their competitors,
making them the best within the market.
57 EMCC Case studies58 EMCC Case studies
A possible for Kvadrat is to go over to the Chinese market and geographically expand their
markets. Doing this also shows that the company is still in a growing phase when it comes to
the product lifecycle.
You can also see it in their finances. Even though they felt the financial crisis, that came back
on track and had a good year in 2011.
When you look at the profit margin you see a tremendous growing from 2007 until 2011 there
is a difference on 10.1 % points. It not only the profit margin that has been growing also
return on assets, return of equity and equity ratio has been growing since 2007 until 2011. The
only thing bad signs were during the financial crisis, but this changed and Kvadrat is still
shows that they are profitable within their company. 59
The vision of Kvadrat is to be the 5th largest textile provider in the world. With their growing
so far and taking risks in e.g. expanding to the Chinese market, they are on track on reaching
their goal.
59 Financial report 2011
Bibliography:
Documents:
1. CBI, Ministry of Foreign Affairs of the Netherlands; Trends and segments for home textiles.2. CBI Ministry of Foreign Affairs of the Netherlands; Prices and price developments for home textiles.3. Danish Import Promotion Office for Products from Developing Countries; Home Textiles; A survey of the Market for home textiles in Denmark.4. DIPO; Home Textiles; A survey of the Market for home textiles in Denmark.5. European Foundation for the Improvement of Living and Working Conditions; EMCC. Case Studies. Textiles and clothing sector- Kvadrat, Denmark.6. FP; Taiwan finds low levels of melamine in Nestle milk products; Channel News Asia. Retrieved 2 October 2008.7. Hansen Trine; The Chinese Challenge master thesis.8. Kvadrat; Environmental Compendium.9. Kvadrat- Financial report 201110. Zukunftsinstitut Kelkheim Germany, Management Report Individualization and the new identity markets.
Interviews:
1. Interview at Kvadrat, 28th October, 20122. Interview with Anders Byriel, ADM. Director, 27th October, 2012
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