STRATEGIC MANAGEMENT ELECTROLUX

Strategy PPT

About

Electrolux

The origins of Electrolux date back to a 1918 cooperative agreement between sales company Svenska Elektron AB and Kerosene lamp maker Lux AB

It is now the second largest home appliance maker by market share just after Whirlpool.

Electrolux is a swedish multinational home appliance manufacturer.

Product Categories

Market Share

SWOT

SWOT Analysis

Strengths- Experience in using acquisitions to innovate and to enter new markets - Will to dispose of non-profit, non-core business- Subsidiaries as decentralized profit centres managed by RONA targets

Weaknesses- Very high Focus on North America & Europe and Low presence in emerging markets

- Low integration of production facilities worldwide - Diversifying causes sometimes financial problems

Opportunities- Gaining advantage by being the first operating in a global scale in this industry- Product innovation can be an important aspect for global competitiveness

Threats- Other competitors chose to move from their domestic markets to operate in a global scale- Decline in world economy may lead to financial problems (replacement demand of long-lasting consumer goods)

Electrolux

TIMELINE

Timeline

Acquisition and Growth1960-1990s

Consolidation

Upto early 2000

GlobalizationTransformatio

nTill 2000s

Profitable GrowthToday

1925 – refrigerator 1951 washing machine1959-dish washers

1918 – Agreement between

Elektron and Lux

corporations

Electrolux

The origins of Electrolux date back to a 1918 cooperative agreement between sales company Svenska Elektron AB and Kerosene lamp maker Lux AB

It is now the second largest home appliance maker by market share just after Whirlpool.

Electrolux is a swedish multinational home appliance manufacturer.

Strategic Management

Strategic

Position

Strategic Capabilit

y

Expectation &

Purposes

Environment

Strategic Management

Strategic

Position

Strategic Capabilit

yExpectati

on & Purposes

Environment

Strategic Positi

on

Business Level

Development

directions

Corporate level

Strategic

Position

Strategy into Action

Strategic

Choices

Case

Strategic Management Model: Electrolux

Strategic Position- Present in 51

countries-First choice in

consumer’s mind

Strategy into Action

Strategic Choices- Focusing on

innovation-Developing eco-friendly solutions

Levels of Strategy Today: Electrolux

Corporate Level

• Six Process Groups – Purchasing,people,branding,product development, demand flow and business support

• Special working group consisting of President, CEO and two members of Group management

Business Level

• Focus on positioning Electrolux as the world’s No.1 choice and No.1 innovator

• Global scale of operations

Operations Level

• Talent Management and providing eco-friendly solutions• 7 Business sectors, 28 Product lines• Division into Consumer durables and Professional Products,

indoor and outdoor products, white goods, floor products and small appliances

Strategic Position

• Lead the development of environmentally sound products and processes

• Actively develop demand for these products ER 8100B, winner of the European competition Energy+

the most energy-efficient refrigerator/freezer in Europe 2001

Strategic Choices: Core Competencies

• Strong focus on value for money

• Creating long term value

Cost & Performance

• Aiming to be the choice of the future

Consumer Insights

• Managing wide array of brands

• Strategically positioning each brand

Building Brands

• Focus on innovation to become world’s no. 1 choice

Product Development:

Innovation

Strategy Action

Decided CO2 emissions savings by EU at the Kyoto Conference

8%

20-25%Total CO2 emissionscaused by electricity used in white goods

4%

Replacing old white goods by new eco-friendly solutions

If the old white goods werechanged into new energyefficient products the savingswould represent 20 to 25%

Energy+

A promotion program by the European Commission & 13 national energy and environmental agencies.

Helping retailers and consumers to identify most efficient products- At least 25% better that energy class A

Promoting the development of ultra efficient appliances- Competition to develop most

efficient products About 40% of the 866 products

were produced by Electrolux Electrolux winning four of the

five Energy+ awards

Market Mechanisms for Green technology

Information campaigns Labeling Reduced VAT on energy efficient products Green procurement Rebate schemes for energy efficient

products White certificates Tax incentives for producers

Strategy Contexts

Strategy Contexts

Profit

Manufacturing Branding Restructur

ing

People Planet

Manufacturing Context

Strategy in Manufacturing Context

Electrolux’s manufacturing strategy is to ensure ultimate satisfaction from the Customer and Consumer. This position will develop and drive projects for sustained performance improvement across key safety, quality, cost, and delivery metrics. This will help to assist with identifying and implementing new technology in plant operations to have a significant opportunity to impact the growth, direction and future of manufacturing.

Strategy in cost reduction/plant close down

Strategic position – Under utilized assets across the industry and specifically with Electrolux.

Strategic choices – Cost performance - Higher prices for materials such as steel,

plastics and resins cut 2 billion kronor from 2011 earnings Consumer Insight - Decline in consumer confidence in

mature markets  Strategic Action – Electrolux aims to save 5.1 billion

kronor ($761 million) a year,  Close down of plants Raise prices across globally upto 7% Costs for closing the plants and reducing capacity will be

about 3.5 billion kronor estimated

Strategy in Production choices

Strategic position – Increasing demand of products so a need to expand production facilities.

Strategic choices – Cost performance – Need for low cost production

of goods without the escalation of other costs Strategic Action –

Bulky consumer durables like refrigerators were put up in Europe and US

Light – vacuum cleaners – Eastern Europe and Asia Pacific

Multinational Restructuring Context

Strategy in Restructuring of Multinational Operations

Strategic Position - get a strong foothold in its native and surrounding countries before moving out

Strategic Choices – Industry Changes – The industrial scenario change

Consumer Electrolux started with the manufacture of vacuum cleaners in the European region. While Electrolux had bought several companies before the 1960s, that decade saw the beginnings of a new wave of M&A activity. The company bought ElektroHelios, Norwegian Elektra, Danish Atlas, Finnish Slev, and Flymo, et al., in the nine years from 1960 to 1969

Strategic Action -All the acquisitions were in the European region in the 1960’s. 1974 was the first acquisition out of Europe which was Eureka in USA. 1990’s saw Electrolux in Asia, Africa, South America etc.

Strategy in Production choices

Procurement from Low cost areas

Procurement Proportion:-2004-30%2010-62%

Expected to reach 70% in couple of years.

Asian Procurement organization- to strengthen interaction with suppliers, quality control,

responsible sourcing and increased efficiency.

Annual Savings to be nearly 3.4 SEKm per year by 2013 .

Introduction of EMS(Electrolux Manufacturing System) led to reduction in Fixed cost to 20%.

Reasons for Restructuring

Saturation in existing markets of North America and Western Europe.Considerably lower saturation in Eastern Europe and Asia with increasing demand for most product areas.

Globalization and Price

Competition

Consumer preferences had started becoming similar so product

variants were reduced.

Market Polarisation

Innovative products enable

higher prices

Major Restructuring in 2004

Continue to reduce cost in production and purchasing.

PRODUCTION: Reducing the number of plants and product

platforms Increasing the share of production in low-

cost countries Goal• Relocation of

production largely completed by 2008

Total Cost• Approximately

SEK 8–10 billion

Savings• Approximately

SEK 2.5–3.5 billion annually as of 2009

Restructuring in Production

In 2003 and 2004 investments were

authorized for a new plant in Mexico and six new plants in Eastern

Europe and Asia.

In 2004 shut down part of production at two units in Australia

and 1 unit of New Zealand.

Reducing the number of product platforms enables

among other things greater standardization of

components, fewer product variants and more

streamlined production.

Restructuring in Purchasing

Branding Context

Strategic Context for Competition

Strategic Position – To become number 1 world over in consumer durables

Strategic Choices – Industry Expertise– Electrolux is the only company in

its field with a distribution and local market presence in over 150 countries

Strategic Action – Electrolux targeted high end consumers in the US

market and middle income households in the emerging markets like Brazil, Asia etc.

They maintained the mother brand of Electrolux all over and also reached out to the local consumer with dominant local brands.

Brand Building…

The Electrolux brand is positioned in the premium segment throughout the world. In Latin America and Southeast Asia, the majority of the Group’s appliances and all vacuum cleaners are sold under the Electrolux brand. Investments in dual brands include primarily AEG-Electrolux, which is a major premium brand in several European markets. The Group also invests in strong, regional brands, such as Zanussi, Eureka and Frigidaire.

Investment in Brand as proportion of sales

2006 2007 2008 2009 20100

0.5

1

1.5

2

2.5

% Proportion of Sales

People- Talent Management

Talent Management

Strategic position – Efficient usage of talent in the company.

Strategic choices – Re-allocate talent to various verticals Train staff to be more sensitive to Customer needs

Strategic Action – Restructuring and revamping the design process,  Previously only engineers were involved in the process Designers, Marketers, Sales People were also included

now Customer insight was a major study before

undertaking development for new product

Talent Management – A China Specific Example

Strategic position – Adapt to a growing market by using local talent

Strategic choices – Adapt the company policy to suit Chinese

Job Market/ Expectations Strategic Action –

Change in Title; Internal promotion/Job rotation

coaching, Individual development plans, team building, formal mentoring

Environmental context

Environmental context

After a series of protests from many environmental activist groups Electrolux devised a three part strategy

Developing and promoting energy- and water-efficient products.

Reducing the energy used in our operations by 28% by 2012 compared to 2005 consumption levels.

Raising awareness of the importance of efficient appliances in tackling climate change

Environmental Sustainability

Legislations

Operational Adjustments

Financial Implications

Scenario – Based Approach

Freon-free emission

Freon depleting ozone layer

CFC-free refrigerators

Increased Consumer Awareness

Positive Image

Reduction in Sales

Products easier to sell - Rise in profits

Strategic Position

Strategic Choices

Strategic Action

Stakeholder Development

Strategic Position

Engaging Suppliers

Smart Living

Urban Development Project

Cut per person carbon emission

Smart-grid system

Reduce dependence on fossil fuels

Storage of renewable energy

Real-time power capacity

Joint initiative - city of Stockholm, academia and businesses

Strategic Position

Strategic Choices

Strategic Action

Electrolux Redesigns Itself

Strategic Position

Consumer Innovation Program

Strategic Choices

- Falling Sales- Products taking too long to market- Losing Value Proposition

Strategic Action

- Cross-functional teams- Visiting consumers’ homes- Sync R&D with commercial products

THANK YOU!