Question

Electrolux

AB Electrolux, popularly known as Electrolux, is a global

leader in home and professional appliances, including

refrigerators, cookers, dishwashers, washing machines,

vacuum cleaners, air conditioners, and small domestic

appliances. It sells more than 50 million products in

150 countries. Headquartered in Stockholm, Sweden,

Electrolux was founded in 1919, as a result of a merger

between AB Lux, and Svenska Electron AB. In 2013,

Electrolux had revenues of approximately $14.5 billion

and employed 61,000 people worldwide.

The Electrolux group consists of six business divisions,

including four major appliances divisions, a small

appliances division, and a professional products division.

The core markets for Electrolux are Western Europe,

North America, and Australia, New Zealand and Japan

accounting for 65 percent of group sales. These markets

are characterized by low population growth and

high replacement product sales. The growth markets for

Electrolux are Africa, Middle East and Eastern Europe,

Latin America, and Southeast Asia and China contributing

35 percent to its sales. Given the rising living standards

in the growth markets, Electrolux aims to increase

its share of sales in these markets to 50 percent by introducing

innovative product offerings in the next two years.

In 2013, Electrolux was among the top five global

players in the household appliances industry, along

with Whirlpool, the Haier Group, Bosch-Siemens, and

LG Electronics. These companies contributed to nearly

50 percent of the global appliances sales. The major

drivers of this industry are increased per capita income,

changing lifestyles, consumer spending, housing activities,

and urbanization. Economic growth in emerging

markets is expected to boost the industry. The

main competitive advantages of Electrolux are global brand portfolio through horizontal integration. In the last

40 years, the group has had a series of acquisitions

around the world that strengthened its global position

through effective targeting and brand positioning

in domestic and regional markets. Examples of such

acquisitions

include Zanussi in Europe; AEG in Germany;

Frigidaire, Kelvinator, and White Westinghouse in North

America; Refripar in Brazil; and the Olympic Group in

Middle East and North Africa.

In September 2014, Electrolux unveiled its agreement

to acquire the appliance business of General Electric, GE

Appliances, for a cash consideration of $3.3 billion. GE

Appliances is one of the leading manufacturers of kitchen

and laundry products in North America, and makes more

than 90 percent of its sales in this region and runs its own

distribution and logistics network. The acquisition also

included a 48.4 percent shareholding in the Mexican appliance

company Mabe that develops and manufactures a

portion of the GE Appliances product range as part of a joint

venture with GE. According to Keith McLaughlin, President

and CEO of Electrolux, the acquisition was expected

presence, consumer insight, design, professional legacy,

Scandinavian heritage, wide product range, people and

culture, and sustainability leadership.

The vision of the Electrolux Group is to become the

best appliance company in the world as measured by

its customers, employees, and shareholders. It bases its

strategy on four pillars: innovative products, operational

excellence, profitable growth, and dedicated employees.

Its brand portfolio is strategically planned to serve luxury,

premium, and mass markets. Alongside the Electrolux

brand, the group has seven other strategic brands,

namely Grand Cuisine, AEG, Zanussi, Eureka, Frigidaire,

Molteni, and Westinghouse.

The “innovation triangle” at Electrolux encourages

close cooperation between its marketing, R&D, and design

functions to ensure faster reach to the market based

on solid consumer insights. This enables Electrolux to

use “same product architecture, differentiated design” to

develop global modularized platforms. These platforms

facilitate planning across divisions by making it easier to

spread a successful launch from one market to another

with adaptations to local preferences, and deliver greater

customer value.

By maintaining strategic emphasis on increasing operational

efficiency, Electrolux has restructured its production

across divisions globally. Electrolux has shifted nearly

65 percent of its manufacturing from mainly Western

Europe and North America to low-cost regions.

Pursuing its strategy of profitable growth, Electrolux

continuously innovates to enhance its current products

and ranges to penetrate existing markets. In 2013, it

launched many innovative products in North America and

Japan. Expanding to growth markets, Electrolux tapped

the potential of the Chinese market by launching a full

range of kitchen and laundry appliances of more than 60

products designed exclusively for China.

An important aspect of Electrolux’s strategy is

to grow through mergers and acquisitions, and build to give the company more financial horsepower on its

balance sheet to do even more business around the world.

With a growing portfolio of smartly positioned brands,

global reach, innovations based on consumer insight,

operational excellence and manufacturing efficiency, and

increased financial power, Electrolux is all set to establish

greater dominance in the global home appliances industry.

Questions

1. Evaluate Electrolux’s strategy in light of its vision and

the global trends in the household appliance industry.

2. What benefits will Electrolux receive from the acquisition

of GE Appliances? How does it fit in with the

strategic direction of the group? What other strategic

options can Electrolux pursue for future growth to

achieve greater global dominance?

Answer 1

1. Evaluate Electrolux’s strategy in light of its vision and the global trends in the household appliance industry.

· To be the best appliance company in the world as measured by its customers, employees and shareholders is what Electrolux envisions.

· Its strategy is based on 4 pillars namely: innovative products, operational excellence, profitable growth and dedicated employees.

· By restructuring of the firm, production efficiency has increased.

· Electrolux is indulged in horizontal integration for integrative growth.

· Their line of ultra-silent products helps prevent noise pollution as their global trends incline towards sustainable products

· In order to produce local variations for different markets, they have followed “same product architecture, differentiated design”.

· The following factors give Electrolux a competitive edge: Global presence, consumer insight, professional legacy, sustainability, Scandinavian heritage and wide product range.

2. What benefits will Electrolux receive from the acquisition of GE Appliances?

Benefits gained through acquisition of General Electric appliance gave Electrolux control over the Kitchen and Laundry products. Ninety percent of the sales will be with Electrolux and running its own Logistics and Distribution Network in North America while 48.4% shareholding in Mexican Appliance Company. Through this acquisition Electrolux will have more financial strength and more global business around the world.

How does it fit in with the strategic direction of the group?

· By experiencing growth with acquisitions as done in the past.

· Product list and diversity in products increased.

· The company is not well-versed with the beginning of newer markets.

· Increase global reach and operational efficiency under the company’s banner.

· Paving a path to the Vision or the Goal the company wants to achieve.

· Company’s technological advancements.

What other strategic options can Electrolux pursue for future growth to achieve greater global dominance?

· Targeting emerging markets like India and other markets with population

· Being price conscious as per the country or place selling in.

· Aim to know the customers requirement and start working towards those by a strong market research program.

· Market research program includes the prices and giving some offers to attract more customers.

· Create more awareness towards the brand and highlighting the specialty of the product as part of the improvement of market channeling.

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