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

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

SWOT Analysis 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

Electrolu x
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 longlasting consumer goods)

TIMELINE

Timeline

1918 Agreement between Elektron and Lux corporations

Acquisition and Growth 1960-1990s

Globalization Transformation Till 2000s

1925 refrigerator 1951 washing machine 1959-dish washers

Consolidatio n Upto early 2000

Profitable Growth Today

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 Management
Strategic Capability Environm ent Expectatio n& Purposes

Business Level

Strategic c Position Positio

n

Strategi

Strategic Capability

Corporate level
Strate gic Strategic Positi Choices on

Expectatio n& Purposes Strategi Strategy c into Positio Action n

Developme nt directions

Environme nt

Case

Strategic Management Model: Electrolux

Strategic Position - Present in 51 countries -First choice in consumers mind

Strategic Choices - Focusing on innovation -Developing eco-friendly solutions

Strategy into Action

Levels of Strategy Today: Electrolux

Corporat e 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 worlds No.1 choice and No.1 innovator Global scale of operations

Operatio ns 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

Cost & Performance

Strong focus on value for money Creating long term value

Consumer Insights

Aiming to be the choice of the future

Managing wide array of brands Strategically positioning each brand

Building Brands Product Development: Innovation

Focus on innovation to become worlds no. 1 choice

Strategy Action
8%
Decided CO2 emissions savings by EU at the Kyoto Conference

Replacing old white goods by new ecofriendly solutions

20-25%

Total CO2 emissions caused by electricity used in white goods

If the old white goods were changed into new energy efficient products the savings would represent 20 to 25%

4%

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

People

Planet

Manufacturin g

Branding

Restructuri ng

Manufacturing Context

Strategy in Manufacturing Context

Electroluxs 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
Bulky consumer durables like refrigerators were put up in Europe and US Light vacuum cleaners Eastern Europe and Asia Pacific

Strategic Action

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 1960s. 1974 was the first acquisition out of Europe which was Eureka in USA. 1990s 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.

Production Areas
Bulky products like refrigerators near to the end market (European) and transportation cost will increase.

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

Light products such as a vacuum cleaner in the low cost areas.

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.

 Competition from Eastern Europe and China due to low production. Electrolux is restructuring for both low production and lower freight charges which their competitors could not achieve.

Globalization and Price Competition

Consumer preferences had started becoming similar so product variants were reduced.

Main focus was innovation and that to in a premium segment.

Innovative products enable higher prices

Market Polarisation

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 810 billion

Savings
Approximately SEK 2.53.5 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 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.

Strategic Action

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

Investment in Brand as proportion of sales

% Proportion of Sales
2.5 2

1.5
1 0.5 0 2006 2007 2008 2009 2010

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 Change in Title; Internal promotion/Job rotation coaching, Individual development plans, team building, formal mentoring

Strategic Action

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 waterefficient 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

Strategic Position Strategic Choices
Freon depleting ozone layer Freon-free emission Increased Consumer Awareness Reduction in Sales

Strategic Action
CFC-free refrigerators

Positive Image Products easier to sell Rise in profits

Stakeholder Development
Strategic Position
Engagin g Supplier s

Strategic Choices
Transport Emissions

Strategic Action
Energy Reductions

Increasing Material Costs

Workshop for 40 major Chinese Suppliers Workplace Standard for Suppliers

Competitive Advantage

Smart Living
Strategic Position Strategic Choices
Cut per person carbon emission

Strategic Action
Smart-grid system

Urban Development Project

Reduce dependence on fossil fuels

Storage of renewable energy

Real-time power capacity

Joint initiative - city of Stockholm, academia and businesses

Electrolux Redesigns Itself

Strategic Position Strategic Choices

Consumer Innovation Program

- 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!