Competitive Landscape Surrounding Nordea and Iss

Competitive landscape surrounding Nordea and ISS

The market for facility management in the Nordic region is almost saturated. As entry in this market does not require high set-up costs and as the skills of the employees do not have to be very high, the market entry is very easy and attracts competitors due to a rising demand for FM services. Despite ISS being the current market-leader in this region, it faces increasing competition. Its main competitor is Coor Service Management who already is under contract for carrying out Nordea’s facility management in Norway. Coor also offers an integrated facility management model, but its market shares are relatively low. Another competitor, Sodexo, also offers the IFM model and all its other services resemble those of ISS. The other competitors in the market, like Compass Group, Aramark, CB Richard Ellis, Jones Lang LaSalle and Johnson Controls, are indeed also multinational companies but they do not yet offer the IFM model and are more focused on certain services. The main competitive advantage of ISS is that in comparison to all other competitors, it does not use subcontractors which affect flexibility and delivery of the service. As ISS invests a lot in training of its employees, the workforce represents a unique asset which can be further leveraged.

To maintain Nordea’s interest in developing the IFM model, ISS could offer additional services which are not yet under contract. In this way they could raise even more synergies and strengthen the mutual interdependence. Through more open communication the trust could be strengthened as well, which serves as a basis for the partnership. The cost reductions achieved through the synergies could then be transferred to Nordea via a quantity-based discount which would be in line with Nordea’s cost reduction strategy and it would also create switching costs.

Integration vs. competition

In order to maintain competition, Nordea could rely on ISS and Coor as its service providers. They could set-up eager goals for each contract period and goal achievement should be measured at the end. On this basis they could create competition for being the FM service provider for a whole country instead of having various providers in each country or to transfer only parts of the service to another player in case of poor performance (like the catering in Denmark to Sodexo). Having only two service providers for the whole region could meet the requirement for a minimum of standardization while maintaining competition.

Another approach would be to create conditions for an internal competition among ISS as the only service provider. While standardizing the operations in the various countries, the outcomes could be measured each year and compared to each other. An incentive would have to be offered for being most efficient in the operations.

Resolving