Electrolux Case Study
Electrolux Case Study
Introduction
The case study highlights the fact that in 2005 Electrolux was the world’s biggest producer of domestic and professional appliances for kitchen, cleaning and outdoor use. There were three important issues in the companies target markets that their strategies had to address, namely globalisation, market polarisation and the consolidation of retailers. The strategies adopted by Electrolux to deal with these issues are covered in detail in the answers to the questions that follow.
1. Explain why issues facing Electrolux were Strategic ● Long Term direction of an organisation – The definition of grand strategy (http://www.businessdictionary.com/definition/grand-strategy.html) being a long term plan of essential actions to achieve it’s major objectives, may include organisational development through acquisition, divestiture or strategic alliances Electrolux’s demerger in outdoor products (Husqvarna) division shaped and focused the remaining units on indoor products to contribute to the overall success of the company well into the future. ● Scope of the organisation’s activities – Business units that were considered non-core operations for Electrolux were divested (examples of this were the operations in motors and compressors). Similarly business units where profitability was too low were outsourced (Examples of this was where the production of air conditioners in the USA, deemed not to be profitable, were outsourced to China) ● Advantage for the organisation over competition – Electrolux identified that low production costs were vital to survival in the market place. They realised that they had to divest in production plants where production costs were too high and to invest in building new plants in countries where production costs were low. An example of this was where they moved the production of refrigerators from Greenville in the US (High Production costs) to Juarez in Mexico (Low
Introduction
The case study highlights the fact that in 2005 Electrolux was the world’s biggest producer of domestic and professional appliances for kitchen, cleaning and outdoor use. There were three important issues in the companies target markets that their strategies had to address, namely globalisation, market polarisation and the consolidation of retailers. The strategies adopted by Electrolux to deal with these issues are covered in detail in the answers to the questions that follow.
1. Explain why issues facing Electrolux were Strategic ● Long Term direction of an organisation – The definition of grand strategy (http://www.businessdictionary.com/definition/grand-strategy.html) being a long term plan of essential actions to achieve it’s major objectives, may include organisational development through acquisition, divestiture or strategic alliances Electrolux’s demerger in outdoor products (Husqvarna) division shaped and focused the remaining units on indoor products to contribute to the overall success of the company well into the future. ● Scope of the organisation’s activities – Business units that were considered non-core operations for Electrolux were divested (examples of this were the operations in motors and compressors). Similarly business units where profitability was too low were outsourced (Examples of this was where the production of air conditioners in the USA, deemed not to be profitable, were outsourced to China) ● Advantage for the organisation over competition – Electrolux identified that low production costs were vital to survival in the market place. They realised that they had to divest in production plants where production costs were too high and to invest in building new plants in countries where production costs were low. An example of this was where they moved the production of refrigerators from Greenville in the US (High Production costs) to Juarez in Mexico (Low
References: |Reference List |Reference Type | |Porter, M 1998 revised edition, Competitive Strategy: Techniques for Analyzing industries and competitors |Book | |http://www.businessdictionary.com/definition/grand-strategy.html |Electronic source | |Retrieved March 9, 2011 | |