Dynapro Systems Inc:

Dynapro is a Canadian company located in Vancouver, British Columbia. Dynapro stared its journey

during the mid 1970s. The technological change during those days gave Dr. Brackhaus the founder of

Dynapro, an opportunity to enter the industrial control market. Dynapro created new computer alternative

to push-button type of control panel and color graphic display system for manufacturing control markets.

Since its birth Dynapro with its continuous innovation, labor empowerment and a few strategic decisions;

has become one of Canada’s most innovative and profitable companies.

Company Analysis:

To understand the overall situation of the company we have conducted an SWOT analysis. This will help

us understand the relative strengths and weakness as well as few opportunities and threats.

One of the major strengths that Dynapro Systems Inc has is its ability to compete in the global market

from its local base in Vancouver. Dynapro entered a strategic alliance with Allen-Bradley a subsidiary of

Rockwell Corporation. Under their commercial agreement, Dynapro designs and manufactures products

that may be brand labeled by Allen-Bradley and sold as if it is their own product. Since Allen-Bradley has

sales channels throughout the world, this gives Dynapro a global presence from its Vancouver base.

Another, strength for Dynapro is its labor empowerment culture which it adopted over the years.

Companies that depend upon continual innovation; labor empowerment is a central feature of the

business. To make every employee feel part of the team, Dynapro has a single cafeteria where everybody

sits together with no distinctions geared to job description. This helps to enhance communication among

employees, which ultimately improves mutual understanding of the problems. In addition, Dynapro has

an annual award of excellence program which is judged by peers. This gives motivation and

encouragement to employees to increase their performance in the organization. The peer judged award

gives employees a sense of power and fairness because the employees are judging who the best is.

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Weakness include Dynapro’s is its growth potential. Any company who wants to grow needs additional

funds or investments from external or internal sources. Since Dynapro is heavily depended on its ability

of continual innovation, R&D plays a major role in the organization’s breakthrough innovations. Dynapro

assigns 15 percent of its sales revenue to research and product development. Since Canadian banks are

not venture capitalists, reliance upon heavy R&D expenditures and creation of new products poses special

difficulties for Canadian financial institutions in evaluating loan applications. So it is very difficult to

borrow from Canadian Banks. So, Dynapro cannot gather funds from external sources rather it relies on

internal source of funds. In addition, labor cost may become a serious weakness for Dynapro. One of the

key success factors of Dynapro is its relationship between the designers and the people building the

product. However, increasing labor cost made many Canadian companies shift its production to a more

cost efficient location like Mexico. If Dynapro shifts its production to another location it may hamper the

working relationship between employees and it could result in all kind of problems in the continuous

innovation process which the organization heavily rely on.

There are some opportunities which Dynapro can exploit. Dynapro can relocate its activities in the the

US. Taxes in the United States are much lower than they are in Canada. In addition, it is very difficult to

hire qualified U.S. employees to work in Vancouver. Another advantage of a U.S. location is that, in a

state like California, Dynapro might be able to sub-contract more effectively and reduce some costs.

Another opportunity of Dynapro is its ability of making its own acquisitions. Though, Dynapro is in

contract with Allen-Bradley it did not hamper their ability make acquisitions of their own. From these

acquisitions Dynapro can create new product lines and increase their innovation. Also these small

acquisitions will help Dynapro to minimize costs and provide easy access to other markets which they

haven’t tapped before and widen their customer base.

One of the major threats of Dynapro is its competitors. The major competitors of Dynapro are U.S. based

companies. U.S. cost structure is very different from Canadian cost structures. Thus, it becomes very hard

for Dynapro to compete with those companies. Another threat of Dynapro is its target market. Dynapro is

heavily reliant in the global market. Only 15 percent of Dynapro’s product has Canadian end user. As we

discussed earlier, Dynapro entered the international market through a strategic contract with Allen-

Bradley. If in any way this contract is terminated, Dynapro will lose its ability to compete in the global

arena which represents almost 85 percent of their customer. So Dynapro’s high dependence on Allen-

Bradley may pose a threat.

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Key Problems & Issues:

One of the major issues of Dynapro is its geographic location. Dynapro is located in Vancouver, British

Columbia. The location of the company has created many problems and issues for Dynapro. One of the

issues is the market that exists in Canada. The owner of Dynapro Dr. Karl Brackhaus said – “The

Canadian market is simply too small. Maybe 15 percent of our product has Canadian end users.” This

means Dynapro has to compete in the international market, mainly with its U.S. counterpart. However,

the cost structure of the U.S. companies and the cost structure of Canadian companies are very different

and it becomes very hard to compete with U.S. companies. Moreover in Canada there is less opportunity

to grow. As we mentioned earlier one of Dynapro’s major weakness is its inability to gather external

funds to grow. Dynapro must always rely on internal funds if they want to expand their business. In

addition, tax and strict environmental laws are not helping Dynapro’s cause. As Dr. Brackhaus clearly

said – “I don’t think that we have an overwhelming advantage here in British Columbia.” Also many of

the companies are switching their production line to a more cost efficient location like Mexico. All of the

issues are related to Dyapro’s physical location. However, Dynapro can’t readily relocate its operation

because it will destroy the labor culture and the efficient management it created since the beginning

which is in the heart of Dynapro’s success. Dynapro is very much depended on continual innovation. The

company believes innovation is depended on face to face interaction of employees. As Dr. Brackhaus

mentioned-“High-tech companies require a certain kind of culture. If we do something which interferes

with that, these companies will not be successful and will have to go where they can to do what is

required.” So, this is why Dynapro is not keen to separate their work force into two and relocate their

operation.

Solutions & Recommendations:

The major problem of Dynapro is its location. There is no immediate solution for this. Dynapro has to

deal with this problem for now. One of problems created by its location is the market size for Dynapro’s

product which is very small. However, Dynapro has more or less eliminated this problem by creating a

strategic alliance with Allen-Bradley. Another, problem is that, in Canada not many banks are willing to

lend money to companies who are heavily depended on R&D. So, it is very difficult for Dynapro to get

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the funds for growth and expansions. One solution for expansion could be acquiring small companies in

the U.S. This will give Dynapro interest free loan for the acquisition form different organization. Dynapro

has previously received interest free loan for the Fluke purchase. So, Dynapro could use this strategy to

expand their operation and widen their customer base.

Another problem is between the U.S. cost structure and the Canadian cost structure. The Canadian cost

structure is not suitable for Dynapro and cannot compete with the U.S cost structure. One solution could

be if Dynapro only shifts its production line of Allen-Bradley products in the U.S. This will save the

transportation cost plus Dynapro could enjoy some tax benefits from this. We are not suggesting shifting

the whole production line to the U.S. We are only suggesting shifting that portion of the product line

which is related to Allen-Bradley. We understand that a center location for all the operational activities is

important for continual innovation and a healthy employee culture. That is why we are suggesting shifting

only a proportion of the production line which can produce only those products which are meant for

Allen-Bradley. This shift will help in the Dynapro manufacture products in the U.S. cost structure and

enjoy some tax benefits.

In addition to this another problem is labor cost. In Canada labor cost is too high, so many of the

companies are shifting its product line to a more cost efficient country like Mexico. Dynapro can’t shift

its whole production operation because it will hamper the continual innovation process and the labor

culture which Dynapro depends its success heavily. One thing Dynapro could do is reduce labor cost by

automation production. Automated production means fewer employees which mean less cost. However,

this could be expensive and a cost benefit analysis should be done as to see whether the benefits out

weight the costs. Another solution could be to outsource intellectual activities to low cost countries.

All these solution mentioned above are hypothetical and more research have to done to come up with

more complete and better solutions.

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