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Abstract
The internationalization of business increasingly is led by service sectors, particularly services based on highly skilled labour industries. This article explores a quite different range of services – those that employ low-skilled workers in labour-intensive services. The article is based on the case of ISS – International Service Systems – which over the past four decades has pursued an aggressive internationalization strategy. The article describes the foreign expansion history in the period from 1960 to the year 2000 that reflected the vision of top management in combination with the development of a unique business model. In order to explain its development, three theoretical frameworks are highlighted, and it is shown that the resource-based view offers a convincing frame of interpretation.
Notes
1. The history of ISS has been described in Bernard (Citation1989, pp. 427–436), Boelsgaard (Citation1995), and Wallengren (Citation2005 – the official ISS history).
2. An example of the entrepreneurial spirit of the company at that time was the foundation of a telephone cleaning subsidiary, Dansk Telefonrensning A/S (Danish Telephone Cleaning A/S), in the last part of the 1930s.
3. Besides educating the cleaning workers in terms of performing standardized services, the idea of the school was also to improve their social status.
4. The motto of DDRS was used until 1973, when the ISS was reorganized. ISS Achives.
5. Like many other Danish companies, DDRS and DFVS carried out work for the German occupying power from 1940 to 1945. Immediately after World War II the two companies were therefore subjected to an investigation by the Audit Commission for German Payments. The Commission concluded that ‘there can be no question of repayment liability’. Less than 2 per cent of the total turnover was derived from works from the Germans. Danish National Archives, Audit Commission for German Payments, case No.4059 DDRS.
6. The cleaning school offered specific teaching materials on cleaning. ISS Archives.
7. The social conditions of many of the 500 cleaning workers that DDRS employed during World War II were hard; most were uneducated, poorly paid and lived in damp, rat-infested small flats (mostly in Copenhagen).
8. In 1944, a trade union chapter was formed at DDRS.
9. This was a recurring theme of the board meetings of DDRS; see for example DDRS, Annual Reports, 1954 and 1955.
10. Also, a laboratory was set up in the period with the aim of developing new and better detergent products that did not damage the surfaces and materials to be cleaned.
11. In 1960, C.L. David – the joint owner and chairman of the boards of DDRS, DFVS and Danske Securitas – died. He had for years been far-sighted and drove the security and cleaning companies forward with new visions and ideas.
12. Mr Poul Andreassen came from SAS (Scandinavian Airline Systems), where he had worked with time studies and rationalization programmes. For a further elaboration of the background, vision and entrepreneurial spirit of Poul Andreassen (see Jepsen, Citation1994; Boelsgaard, Citation1995). Poul Andreassen retired in 1995 as the CEO of ISS.
13. For example, DDRS took over the cleaning contracts for the Danish State Railways, Copenhagen policy headquarters, the Copenhagen University Hospital, several state hospitals, etc.
14. For example, in conjunction with the carpet supply company Cubus, DDRS by 1968 established Gulv og Væg (Floor and Wall Service Partnership). That was during the period when wall-to-wall carpets were extremely popular in Denmark.
15. It was said in various interviews that Poul Andreassen was a real globetrotter, always on the move, flying from one major airport to another, negotiating acquisitions of service companies, and closing big service contracts, etc.
16. The problem was that it no longer made sense to continue with DFSV – the security company – as the parent company. During the 1960s, the cleaning business had grown so rapidly that DDRS became much larger than its parent company.
17. In about the mid 1970s ISS came under ‘media fire’, especially in the Scandinavian countries. As a part of the women's liberation movement of the 1960s which was calling for equal rights, equal payment, etc., the ‘cleaning women’ became a strong symbol of oppression. Women activists went into action against the wages and the working conditions of female cleaning workers. In Sweden the image of ISS was particularly hard hit. There was much controversy in the media with articles, TV debates, etc. (see the Danish daily newspaper Information, 12 and 30 April 1975; Larsen, Citation1975).
18. For example, ISS Catering A/S, a company that took over responsibility for canteen operations at companies and institutions, was established in 1975. Denmark's largest laundry and linen supplier Thor Vask A/S was acquired in 1977 and later renamed ISS Linnedservice A/S (ISS Linen Service). During the oil crisis of the mid 1970s, the Danish energy control firm Odin Clorius A/S was acquired in 1974.
19. The idea was to use the new information technology on a number of technical installations and services in order to optimize the customer value of the products. Burglar and fire alarms, energy management and admission control systems could all be connected to a general planning system that co-ordinated other services such as cleaning, maintenance and laundry services. The overall result would be increased efficiency and reliability in the total service delivery.
20. In particular, an employee share scheme was successfully introduced. In 1986, about 4,000 employees became co-owners of ISS (Interview with Jan Rasmussen).
21. The history of the internationalization of ISS rests on a comprehensive study of business archive sources such as internal reports, minutes from DDRS/ISS general meetings, newspaper cuttings, and company periodicals (i.e. ISS News) spanning a very long period. Moreover, the narrative is based on interviews with nine former business managers, the key players in the early foreign expansion of ISS in the 1960s, 1970s and 1980s. These are: Poul Andreassen (former CEO and president of ISS), Ib Goldschmidt (former Deputy Director of DDRS and Marketing Director of ISS), Waldemar Schmidt (former Division Manager Europe and later CEO of ISS), Henrik Slipsager (former Division Manager USA), Jan Rasmussen (former Human Resource Manager), Knud Reckweg (former Head of Public Relations), Harald Queseth (former Director of Corporate Planning), Flemming Schandoff (former corporate operation manager), and Niels Mengel (former Director of Finance). The transcripts of the interviews are available on request.
22. It later became the largest cleaning company in Sweden with a turnover of DKK 1.3 billion and more than 7,000 employees (1991). In 1949, DDRS also established another department in Gothenburg, Sweden; however, after the first five month a loss was realized and the department closed down. (Minutes of DDRS Board Meeting, 3 November 1949. ISS Archives).
23. Not until 1975 did DDRS return to the Finnish market.
24. In fact the decision dates back to 1962 when an international department was set up, the Scandinavian Sanitary System (SSS).
25. The history of the Swiss market is described in ISS News (1984, No.2).
26. The authors were told that the terms of the epoch-making agreement with Electrolux were formulated on the back of a napkin during a lunch at a Copenhagen restaurant. Interviews with Ib Goldschmidt and Poul Andreassen.
27. The agreement can be found at the Ministry of Trade Archive No.88-41-67, Danish Business Archives.
28. The two companies, with about 1,700 employees, were merged under the name Empressa de Servicos Continental S/A Ltda (ISS News, 1973, No.4).
29. The agreement was observed for nine years. After the break-up, ISS was interested in taking over Electrolux’ cleaning division. As early as 1985/86, the two CEOs had an in-principle agreement on a takeover, but it was only realized in 1991 when ISS acquired all Electrolux cleaning activities in the USA and Scandinavia for SEK 750 million.
30. In financing the international acquisitions, ISS was listed on the Copenhagen Stock Exchange in May 1977. Later, in 1989 and 1994, ISS was listed at the Stock Exchange in London and New York respectively (Interview with Niels Mengel).
31. This must be viewed in relation to the privatization wave that in this period swept over Europe.
32. For the history of ISS in the important UK market, see ISS News (1989, No.3).
33. Also, the financial functions of ISS were decentralized (Interview with Niels Mengel).
34. Most of this section is based on Wallengren (Citation2005).
35. The British financial executive Michael Ashcroft and his company Aaxis Ltd took over ISS Inc. The deal was closed with a purchase price of $1 and a 19.5 per cent stake in Aaxis. At the same time, Aaxis took on all ISS A/S guarantee commitments related to ISS Inc., which totaled to about US$160 million.
36. This perspective is based on the behavioural theory of the firm, and was proposed by Johanson and Vahlne (Citation1990), and further developed by Welch and Loustarinen (Citation1988).