Page 1: Introduction
Successful businesses know when and how to adapt and change. This involves growing some areas of activity and cutting back on less profitable areas. Companies can often benefit from acquiring businesses operating in overseas markets. For example in Europe, the USA or the Far East, the availability of new customers or cheaper costs of employing people may give competitive advantage.
This case study describes and analyses the growth of the Davis Service Group. The term Group describes companies that are joined together with a shared ownership. The Davis Service Group provides textile maintenance services in the UK and Europe. This includes linen hire, workwear rental, dust control mat, laundry and washroom services.
The Group operates across Europe from its London headquarters. It employs 16,000 people and has an annual turnover of more than £700 million. The Davis Service Group used to be a conglomerate. A conglomerate is a group consisting of businesses focused on different markets.
In 2001, the Davis Service Group consisted of three main operating companies each of which was the UK market leader in its own sector:
- Sunlight (textile maintenance) hiring sheets to hotels, hospitals and private businesses.
- Sunlight was the original company from which the Group developed
- Elliott (building systems) hiring modular buildings for temporary office space
- HSS (tool hire) operating through 450 outlets in the UK
Although these companies were strong, they operated only in the UK which had become a mature market. This means that there are fewer opportunities for growth. Sunlight was the strongest performing part of the business with 45% of revenues at that time.
Therefore, to improve return on investment to shareholders, the company chose to focus on the linen hire and textile maintenance part of the business and look for ways to grow it overseas.
Davis Service Group had a number of options to choose from to follow its strategy of overseas growth. A strategy is a plan that a company develops and implements. Strategic choice involves deciding:
- whatbusiness sector or market to expand into
- whento expand
- how to expand for example, whether to take over another company, set up a joint venture or set up a new company