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Question 1: Explain why the issues facing Electrolux were strategic.
Try to find examples of all of the items cited in that section.
The
company's strategy consists of a combination of competitive movements and
business approaches to compete successfully and to achieve organizational goals.
Company’s goals are concerned to profitability, productivity, growth,
technological zing, stability, independence, survival, competitiveness,
customer service, ability to pay, product quality, diversification, employee satisfaction
and well-being and so on.
It is
management’s game plan for growing the business, attracting and pleasing
customers, conducting operations, achieving financial and market performance
objective and become competitive in the market.
Electrolux
case study is concerned about following strategic issues of the organization:
Long-term strategic direction
|
Scope
|
Business environment
|
Advantage over its competitors
|
Meeting strategic fit with the business
environment
|
Resource availability and competence of
the company
|
Long-term
strategic direction
The long
term goal was the development of Electrolux, to speed up market-oriented
company based on understanding the customers’ needs. Some other long term
issues those Electrolux has taken as strategic –
Increasing
the productivity, procurement, and logistics efficiency
|
Continuous
product and employee development
|
Strengthening
the brands of Electrolux
|
Building
a strong global brand
|
Scope
Scopes of
Electrolux captured by Hans Straberg from the annual report 2005 are:
- Continue
to cut cost and kick out market complexity in all aspects of operations
- Increases
the product renewal based on consumer insight
Increasing
investments in marketing and building the Electrolux brand as a world leader in
electronic industry. It was strategic, because Electrolux had a choice between concentrating
on one area, or many outlets all over the world. Electrolux was active in a
sector with strong global competition and sustainability.
Business
Environment
- Globalizing products and related services all
over the world and there will be more concentration on product
development, brand-building, marketing etc.
- Market polarization make changes in
consume, strengthening global competition and growth. Thus increasing the
demand for both basic and higher-price products.
- Consolidating retailers with more big retail
chains and fewer traditional dealers. That helps Electrolux with wide
geographical coverage, high purchase volume and to keep prices low.
Advantage
over its competitors
Another aim
for Electrolux was gaining advantages over its competitors. So maintaining
competitive production costs is a prerequisite for survival in the market. For
the achievement of obtaining competitive advantages Electrolux introduced the
following:
- Providing
quality price by globalization has offered high quality product at
affordable prices.
- Shift
to low-wage countries to move from the US market after Mexico.
- Low
cost Purchase.
- Shifting
competitors focus on product development marketing and brand building
- Established
talent management to develop future active leadership, international
career opportunities and a result oriented corporate culture to build up
good human resources.
Meeting
strategic fit with the business environment
Strategic
fit was also a strong issue for Electrolux. They are trying to set a strategic
positioning differing from its environment through niche market in a particular
segment. According to the review of Hans Straberg, Electrolux is expecting the
group to report higher profitability again in 2006 by launching some new
products in both North America and Europe.
For this
purpose, strategic decisions usually are trying to achieve any advantage for
the organization. The problem for Electrolux was that it was losing the advantage
in the fast-growing economies and this forced them to prioritize building the
Electrolux brand globally, as well as in all product categories. The advantage
can be achieved in different ways and differently interpreted. Organizations
use conclusion it must be strategically improve its cost position through
better coordination at the global level. For example, Electrolux designed a
project to drastically reduce the number of suppliers.
Resource
availability and competence of the company
By
resources, we mean financial, human and the organization’s resources which are
more important in the implementation of strategic decisions. Electrolux is
attempting to bring out the strategic capabilities of the staff. For example, they
established talent management processes and tools to ensure group access to
competence in the future. Strategies need to be considered are not only the
existing resource–base of the organization which is suited to the environmental
opportunities but also in terms of resources those can be obtained and
controlled to develop a strategy for the future.
Electrolux’s
consideration about values and expectations of competitors
An
organization's strategy will be affected by the values and expectations of
those parties who have power in and around the organization. The beliefs and
values of these players have a more or less direct impact on the organization.
These players
(actors, groups and individuals) provide directions to the company to sharpen
the strategy in following manner –
- Accelerating
the development as a market-driven company
- Greater
understanding of customer needs and providing low – cost and high quality
products to create customer delight
- Creating
efficient purchasing and supply-chain management that ensures high quality
services than competitors
- Developing
leadership skills among employees to keep the company ahead of their
competitors
These
strategies assist to improve total operation, quality, customer satisfaction
and profitability.
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Question 2: What levels of strategy can you identify at Electrolux?
Introducing
the case study there are three 3 levels of strategy, which could be. These are:
In that
case Electrolux have followed 3 different levels of strategies in different
segments of the business operations.
Corporate
level strategy
|
Business
level strategy
|
Operational
level strategy
|
Corporate
level strategy
Corporate
strategy level brings the overall game plan for the management of a number of
companies. From the case study he was moving and disposals made by Electrolux
were done, on the corporate level that emphasizes, the larger restructuring
exercise performed with added value for the different parts of the business.
The relocation of high cost countries low-income countries launch of new
products, outsourcing air conditioners in the United States, China, shutting
down not to the core business and product development, as well as the branding
of Electrolux products, all decisions were level. A further level the decision
accelerated the development of Electrolux as market destination was oriented
company based on better understanding of customer needs and finally building
strong brands.
Following
actions ensures that Electrolux have Corporate strategy:
- Larger
restructuring exercise at different parts of the business for adding value
- The
relocation of high-cost countries to low-cost countries
- Brand
Management activities to make Electrolux a global brand
Business
level strategy
Electrolux
is following business level strategy to strengthen the market position and to
build competitive advantage. That will ultimately assist to gain the competitive skills in a particular
market. Objectives of Electrolux’s business level strategy are:
- Removing
market complexities and cutting cost in all aspects of operations. It can
be achieved through efficient purchasing and production systems.
- Increasing
the product renewal based on consumer insight. And that will help to
capture the portion of investment.
- Increasing
investments in marketing and brand building that will place Electrolux as
a world leader in the industry.
Operational
level strategy
The
third and final level of strategy used by Electrolux is the operational
strategy. Electrolux is dealing the
strategy successfully through some following functions:
- Maintaining
a more efficient production and logistics systems and also a more
efficient purchasing arrangement.
- The
systematic development of brands and staff by the intensified product
renewals which are implemented at the operational level and strategic
decisions.
- The
strategy is effectively implemented by everyone in the organization to
achieve a common goal.
These 3
strategies are helping Electrolux in its attainment of ultimate objective.
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Question 3: Identify the main factors about the strategic position
of Electrolux. List these separately under environment, capability and
expectations. In your opinion which are the most important factors?
Electrolux
is the second largest home appliances company after U.S giant Whirlpool. It has
structured the environment in such a way so that they can hold their impressive
growth and development. They even restructured the operation in different
points where needed. From that case study I understand that they are carrying
on operations with some important factors -
Environmental
factors (The Environment)
|
Strategic
capabilities
|
Expectations
of stakeholders
|
Environmental
factors
The
environment of an organization stands on a framework of Political, Economic,
Social, Technological and Legal factors. Accurate management of these factors
helps a firm in attaining the preferred success. These factors will furnish the
environment to identify the threats in advance would have to be addressed, and
also opportunities acted on. This environmental study must be carried on even
if the organization is doing well or not. Companies use risk management
techniques on its business environment, which will help the organization to identify
potential future risks and opportunities.
Political
- Electrolux
used the political advantages of World War II. They identified the major
growth in demand for domestic appliance and produced different home
appliances such as washing machines and dish washers.
- Electrolux
also established production outside Sweden in Germany, UK, France, USA and
Australia.
- By
using political advantages Electrolux also conducted total of 59
acquisitions. Some major acquisitions are Zanussi (Itally), White
Consolidated Products (USA), the appliance division of Thorn EMI (UK), the
outdoor products company Poullan / Weed Eater (USA) and AEG Hausgerate
(Germany). But the biggest acquisition was the Swedish Granges Group.
Economic
According
to the annual report 2005 Electrolux is very economical in its overall
operations. Some instances those ensured the Economic success of Electrolux –
- Electrolux
become globalized and started its production in those countries where cost
of production is low. That helped to achieve economy.
- Electrolux
extended 75% of its total sales outside Sweden. That helped them to
increase its turnover and economic growth.
Social
Electrolux has enjoyed the advantage
of low cost production by emphasizing more on their production plant location
and cheaper suppliers. But in most important social segment Electrolux has
little weakness in its distribution channels. Electrolux is dependent on its
traditional distribution system. But big retail chains benefits from high
purchasing volumes and wide geographical coverage. This helps the company with
–
- Low cost of serving large
retailers
- Gives the opportunity to
lowering the price to attract more customers
- Makes it easy to reach customers
in every geographical location
In present days more customers
are moving from traditional shops to large chain stores, such as super stores.
Electrolux should emphasize on that issue to capitalize the social benefits and
convenience of customers like (LG and SAMSUNG).
//Technology
Electrolux
is the largest producer especially for kitchen appliances. It has other wide
ranges of products. Not only from that
case, but also from the knowledge of customer satisfaction Electrolux’s
products are well functioned and durable. That ensures advanced technological
specifications of its products. Moreover Electrolux invested heavily on technological
development of products.
Legal
Electrolux
is holding its productions and distributions in many countries. They are
operating successfully as they are fulfilling all regulations of those
countries.
Strategic
capabilities
Strategic
capability is quite simply the capacity of a business to survive, prosper and
deliver future value. It is the process of shaping strategies and putting them
into action. It suggests that a company’s competitiveness depends on how it
does what it does. There is no single method or universal metric for measuring
or noting strategic capability. It comprises a number of distinguishable
components. Here for measuring strategic capabilities of Electrolux we are
taking – Strength and Weakness into account.
Strength
Some
strengths those Electrolux is possessing are very significant for its long term
future growth and prosperity -
- The
company is focusing more on sustainability issues
- It
has the ability of increasing its operating profit margin with low
suppliers and production costs
- It
has results-oriented corporate culture, development of human resources and
a strong environmental commitment
- Electrolux
has a good relationship with its suppliers
- Electrolux
runs on market driven strategy that helps to increase sales.
Weaknesses
Electrolux
is a pretty successful company. Although it was campaigning with very good
strengths, it has some points of weakness –
- Its
traditional distribution system were lag behind in pace comparing to big
distribution chains.
- Electrolux
purchased 59 other companies including some big companies and those
companies were in high cost countries
- Electrolux
were dealing with many suppliers which were increasing costs
- It
was very costly for them to develop a project to reduce suppliers
Expectations
of stakeholders
Fulfilling
the desires of stakeholders will assist Electrolux to be the market-driven
company. Stakeholders’ expectations will be fulfilled as they are ensuring -
- Electrolux has a better understanding of
the customers’ needs and playing role by considering their expectations.
- Increasing
wide range of product renewal based on consumer insight. (Expectations of
Customers)
- Improving
and maintaining quality as a part of competition with main competitors.
(Expectations of Customers)
- Continuation
of cost-cutting and expelling complexity in all aspects of operations
especially in supplies. (Expectations of Suppliers)
- Increasing
investments in marketing and building the Electrolux brand as a world
leader in domestic and professional appliances industry. (Expectations of
Customers)
- Increasing
profitability to fulfill shareholders expectations. (Expectations of
Shareholders)
- Developing
leadership and international career opportunities to develop company’s
human resource. (Expectations of Employees)
These
expectations of stakeholders were as employees, suppliers, customers and
shareholders. Electrolux is pretty successful in fulfilling all stakeholders’
expectations.
My
response to most important factors
The most
important factors are -
- Environmental
factors are very crucial, because it helped Electrolux to understand the framework of its
operations. Therefore, a PESTEL analysis will be a
guideline in designing the framework.
- Expectations
of stakeholders are very important. Because their expectations from the
organization are put in the vision, mission and values.
- The
strategic capabilities of a firm are centered on its resources and
competences. Here resources refer to human, financial and the organizations
resources. Electrolux successfully managed its strategic capabilities by
meliorating all resources and thus Electrolux enjoys some competitive advantages over its
competitors.
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Question 4: Think about strategic choices for the
company in relation to the issues raised.
Strategic
decisions are concerning the option for the strategy in relation to the
direction in which to perform the operation. Thus, this can be seen that from
the following five dimensions:
Business
level strategy
Corporate
level strategy
International
strategy
Entrepreneurship
Methods
Business
level strategy
Typically
these involve pricing and differentiation strategies and decisions about how to
compete or collaborate with competitors such as reducing the number of product platform, increasing
productivity, reducing inventory levels and increasing delivery accuracy. Another
option which is implemented by Electrolux is the efficient procurement system,
to improve cost position due to better coordination at the global level and the
drastic reduction in the number of suppliers. This strategy in reflected by
Chief Executive Hans Strasberg.
These
strategic plans are:
- Continuing
to cut cost and kicking out market complexity in all aspects of operations.
- Increasing
the product renewal based on consumer insight.
- Increasing
investment in marketing and building the Electrolux brand as the global
leader in domestic and professional appliances industry.
Corporate
level strategy
Corporate
level strategy is concerned with the scope or breadth of an organization. These
include diversification decisions about the products portfolio and the spread
of markets. Also concerned with the relationship between different parts of the
business and how the corporation adds value to these various parts. For
following issues Electrolux followed corporate level strategy –
- Larger
restructuring practice at different parts of the business for adding value.
- The
relocation of high-cost countries to low-cost countries.
International
strategy
International
strategy is a form of diversification into new geographical markets. This
strategy focuses the right path of entering to a foreign market by exporting,
licensing, direct investment or acquisition. From the case study we get clear
ideas that Electrolux sold most of their products outside Sweden. In 90s it was
75% of total sales.
Entrepreneurship
In
another word Entrepreneurship is “Innovation”. Every organization passes the march
of entrepreneurship especially at the beginning of the operations. Electrolux’s
CEO Hans Straberg emphasizes the acceleration of market orientation of the
company through following innovations –
- Increases
the product renewal based on consumer insight.
- Increasing
investment in marketing and building the Electrolux brand as the global
leader in the industry.
Methods
Methods
are the fashions of pursuing any new strategy. According to the case study,
Electrolux were engaged with some newly promote strategies in its operations. Such
as –
- A
series of important new innovations lunched both in North America and Europe.
- Development
of new distribution channels for the products of Professional food service
and Laundry equipment.
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Question 5: What are the main issues about strategy into action
that might determine the success or failure of Electrolux’s strategies?
Strategy
into action means whether the strategy is put into action or not. “Strategy
Development” processes of an organization are very important. Electrolux’s
strategies are the blend of Intended and Emergent strategy. Here formal strategic
planning decisions are the Intended and actually pursued decisions are the Emergent.
Organizing a company
involves organizational structures, processes, relationships and the
interaction between these elements.
As in the case we can see that
Electrolux is “Restructuring” the under-performing section (Air Conditioners)
in USA, which was not profitable because of high cost. And then it was shifted
to china. Also, in the 1930s the company spread its wings by establishing
production outside Sweden in Germany, UK, France, USA and Australia. Another
restructure is done in 2000s where 85% of sales were in consumer durable
products and 15% from products of professional users.
Electrolux’s strategy in action may
take the form of “Resourcing” strategies in separate resource areas such as
people, information, finance and technology in order to support the overall
strategies. Electrolux attempted to develop its human resource with an active
leadership development, international career opportunities and a
result-oriented corporate culture.
Managing strategy very often involves
“Strategic
Change” which is another important area. That means the implementation
of new strategies will have some degree of changes. These changes are seen in
the distribution channel where Electrolux shifted its traditional retail chains
to large distribution chains for the products of Professional food service and
Laundry equipment.
All these methodologies, resources,
processes, strategic elements are place in the “Practice of Strategy” at Electrolux.
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Thank You
