Lagercrantz is a technology trading group that creates customer benefits based on high technical and business knowledge, combined with products from world-leading manufacturers or proprietary products. The vision is to be a leader in value-creating technology trade with market-leading positions in several expansive niches.
Lagercrantz Group’s business concept is – within well-defined niches and in partnership with customers and suppliers – to offer value-creating technical solutions in electronics, electrics, communication and adjacent areas. Lagercrantz offers customised products, standard components, services, software and systems its technology areas. The value added created by Lagercrantz gives the Group a place as an integral part of customers’ product development and day-to-day production. Customers are offered a high degree of competence, availability and service. For Lagercrantz Group’s suppliers, this business model means partnership with a player with effective marketing based on extensive knowledge of the local market and strong customer relationships.
VISION
“A leader in value-creating technology trade with market-leading positions in several expansive niches” is Lagercrantz Group’s vision. The vision encompasses three basic concepts: leading, value-creation and market-leading positions.
Leading means that, over time, the Group must live up to three basic tenets: growth, profitability and development. The first two requirements make up the Group’s financial goals. The third requirement, development, means that we must create positive changes based on new technology or new solutions in the niches where we conduct business; we must lead the sector’s development and develop the organisation of our own business.
Value-creation means that Lagercrantz Group in its sales shall add value to the goods and services offered to the market. By nurturing Lagercrantz Group’s collective experience, technical and business knowledge and broad contact surface, added value is created for those customers who choose to buy from Lagercrantz Group. Customers are offered development of new solution based on new products and technologies, design and adaptation to a specific need, as well as service, support and training.
Market-leading positions in several expansive niches are also a basic maxim. Historically, Lagercrantz Group has succeeded best in businesses that have had a significant role in a niche. Lagercrantz Group typically defines a niche as a well defined market. A market-leading position means being number one or two on the strength of market shares in the niche.
That position offers excellent opportunities for sustained profitability and development by functioning as an important link between the foremost technology suppliers and the most demanding customers. Another benefit is that opportunities are created for building a strong product line adapted to a specific customer need. A strong position in a well-defined area also means that competent staff can be recruited and retained. That is an important factor for securing leadership and competence over the longer term.
GOALS
Lagercrantz Group’s financial goals are:
- Earnings growth of 15 percent per year over an economic cycle, in the sense of result after net finance items.
- Return on equity of not less than 25 percent.
This means that earnings will double over a five-year period. Lagercrantz’ general goals are broken down and set before each year in connection with the drawing-up of business plans performed by each subsidiary. The requirement for profitability means that the return on working capital in a business unit must be at least 45 percent. The goals are continually followed up during the year in order to allow for quick response as needed. For the last couple of years the Group has been working with clear internal benchmarking in such a way that each subsidiary can measure the outcome for one’s own unit relative to other companies in the Group. Important work has been going on within the Group to train all employees in the basic economic metrics and the key performance indicators used.
For an extended period, fourteen consecutive quarters by the end of the second quarter of 2008/09, the Group has reported an improved result compared to the corresponding year-ago period. This has meant that the internal goal for earnings growth has been exceeded. This improvement in earnings has been achieved through consistent work to develop existing businesses, at he same time as a number of successful acquisitions have been made. The focus for this work has been to strengthen business models, organisational development and product line changes. Acquisitions have meant that Lagercrantz has been able to grow into new areas, such as power generation and technical security, and that the incidence of new products has increased. Much like other companies, the Group was hit during the second half of 2008/09 by the deep financial crisis that subsequently turned into a clear recession. As a result hereof the Lagercrantz Group has taken a number of steps in its business units, especially aimed at cost-cutting and capital rationalisation. The worsening market situation, in combination with the costs for these measures, impacted the result and goal fulfilment during the second half of the year. The return on equity has increased steadily in recent years in lock-step with the improved result. The level of 25 percent was not achieved, however. At the end of 2008/09 the return achieved was 17 percent adjusted for items affecting comparability.
STRATEGIES
Lagercrantz Group shall consolidate its position as a profitable and stable growth company by continuing to develop existing businesses in the Group and by acquiring more companies with strong positions in well-defined niches. In order to achieve these goals for earnings growth and profitability, Lagercrantz Group works with six common main strategies:
- Decentralisation and management by objective
- A strong corporate culture
- Businessmanship
- Strong market positions in niches
- Increased value added
- Acquisitions
Decentralisation and management by objective
Lagercrantz Group has about 25 operating subsidiaries, each of which operates as an individual profit centre with its own clear business concept, its own goals and with its own strategy. Each management group develops its own business with a great deal of freedom under its own responsibility. In this way the mission-critical decisions are made close to customers and market. It is here that the knowledge about customers needs is the greatest. This also creates short decision-making paths and promotes a high degree of participation.
The subsidiaries are managed by objective, goals that are of a long-term nature and based on the Group’s three main requirements, for growth, profitability and development. Business plans are drawn up each year for every company with quarterly goals for earnings and how much capital is tied up in the business. Plans are followed up on a regular basis and action is taken as needed.
The 2008/09 operating year brought dramatic changes in the general business situation. This meant that extensive action was taken to adapt the organisation, activities and cost levels correspondingly to the business premises at hand.
Strong corporate culture
Lagercrantz Group nurtures a strong corporate culture, which traces its origin in the way of working and the approach to business that is characteristic of a successful technology trading company. There is rich lode of collective experience in the Group and this is systematically exploited and disseminated in the form of courses and training, but also by encouraging engagement and team play between associates in different parts of the Group.
The common value base for Lagercrantz Group’s corporate culture rests on four concepts:
- Businessmanship – the ability to see opportunities, to create good relationships and to focus on earnings.
- Responsibility and freedom – the ability to take control and realise own ideas that generate earnings.
- Simplicity and efficiency – the ability to work in a concentrated manner and to find simple solutions, to prioritise the right things and to do them in the right way.
- Willingness to change – the ability to grasp onto new things and to adapt to the market.
Businessmanship
Businessmanship is something very basic for Lagercrantz Group and distinguishes all work that is done. This concept includes contributing knowledge and acting in such a way that added value is created for the customer – by refining the products of others or by offering our own products. Businessmanship means having a holistic perspective and the ability to recognise new business opportunities and future needs in the marketplace. It also means working close to your customers and to create good sustainable relationships on a long-term basis based on high ethics and honesty. Personal selling is an important component of businessmanship. Lagercrantz is a value-creating partner for buyers of technology.
Strong market positions in niches
Lagercrantz Group’s subsidiaries strive to achieve a strong market position in their niche. A niche consists of a well-defined technology area, customer segment or geographic area with a total market value that is normally in the range of MSEK 200–1,000.
This means working on a defined market with considerable possibilities of impacting business terms and conditions. Proximity to the customers, high technical competence and a focused method of working make it possible for us to create sustainable competitive advantages, even in relation to the largest international players. For Lagercrantz Group, having a leading position means to be number one or two in each respective niche.
Increased value added
Lagercrantz Group is focused on delivering high value added to its customers, and continually strives to raise it. With knowledge of a local market and specialised technical know-how, Lagercrantz Group contributes to the added value by customising, developing and combining products from different suppliers in the solutions presented to the customers. There is also customer benefit in the fact that Lagercrantz Group makes different manufacturers’ products available on the market and offers training, support and service. The degree of refinement is continually enhanced by phasing out standard components and replacing them with products that generate greater customer value. New products and services are also increasingly being offered. The development is in the direction of areas which are technically complex, or open the doors for a unique offer.
Acquisitions
Lagercrantz Group’s goal for earnings growth will be realised in part by organic growth and in part by acquisitions. The acquired companies strengthen the market position in existing areas, or make it possible to enter new, interesting markets. It is crucial that acquired companies have a well-tested business model and earnings capacity, great competency among its leaders and associates and good growth opportunities. Expansion in the technology areas where Lagercrantz Group is already established is accomplished all over northern Europe. For other areas, which are new to Lagercrantz Group, acquisitions will in the first instance be made in the Nordic Region. Given the state of the market prevailing in 2009, the focus will be on finding and acquiring companies primarily in the Nordic Region.
STRATEGIES STAND FIRM
The steep economic downturn towards the end of 2008 and in the beginning of 2009 has meant that Lagercrantz Group’s focus has shifted to ensure a stable, profitable business also in turbulent times. Measures will be aimed at cutting costs and reducing capital tied up in the Group. Lagercrantz Group’s long-term efforts at creating growth, profitability and development in the Group based on these strategies will continue, however, and the assessment is that decentralisation and management by objective, nurturing a strong corporate culture, businessmanship, niche thinking, increased value added and acquisitions are at least as important in a downturn phase.
