Assignment for the first date over the text Electrolux from the exploring corporate strategy book Third of september, 2010 Question1 : Refer to section 1. 2. 1 and explain why the issues facting Electrolux were strategic. Try to find examples of all of the items cited in that section. First of all, strategic decisions are long-term decisions and so they will not bring results in a few months or faster and therefore you will not know if they will bring success to your company. So Electrolux made some decisions that will show their results in the future. They decided to move a production facility from Greenville in the US to Juarez in Mexico.
Through this step Electrolux will try to cut the costs at a remarkable rate. The decision to invest 2 percent of every years sales in developing new products is also a strategic decision because of the fact that Electrolux will never know what exactly will be developed and how the market will react on that. To invest two percent of the revenues in marketing, more precisely in brand-building, will also not show results in some months. Electrolux will have to control this investment in a few years and than they will have to decide wheather it was senseless or if it was helpful.
All those points will have the purpose to become the number one again and to gain advantage over competitors, in this case to overtake Whirlpool again. Furthermore they decided to sell their outdoor sector what is, as a result, a concentration on what they really are good at and what is called a change in the business environment. The decision to move the production from the US to Mexico and in the future from Germany to a new location will help to satisfy the stakeholders because of the expected improvement of the costs.
In the text it is mentioned that Electrolux has build some talent management processes which will help to find the best personnel if some is needed and will help to improve the level of the staff that is already there, this is called building competences. Question 2: What levels of strategy can you identify at Electrolux? (Refer to section 1. 2. 2. ) In the text about Electrolux you can see that this company had two divisions in which they were on the market.
The first division was and is the production of domestic and professional appliances for the kitchen and cleaning, such as washing machines or fridges. The second division was all about outdoor products such as lawn mowers and chain saws. The second division was demerged to concentrate on the first sector. Both were and one still is a strategic business unit, the shortcut is SBU. The very high amount of new products which are developed every year at Electrolux is a corporate-level strategy, because it helps to improve the diversity of the offered products.
The pricing strategy of Electrolux has two characteristics. First of all there is the market where a lot of people demand basic products. In this field the prices may not be too high. The second sector is the high-price product sector which is increasing. Here Electrolux can call some higher prices and therefore earn more. The decision in the pricing strategy is a part of the business-level strategy. Question 3: Identify the main factors about the strategic position of Electrolux. List these separately under environment, capability and expectations (see section 1. . 1). In your opinion which are the most important factors? From an environmental point of view Electrolux is located in a few states around the globe, which is necessary to produce with lower costs but has also a very high coordination effort. Seen from an economic point of view it is very important to save costs where it is possible, for example to produce in Sweden and to sell products in Brazil is usually not the best way to manage it because of the high costs in personnel in Sweden and the transportation costs.
What is a problem for Electrolux is the fact that they produce products that will be waste in the future and therefore they will have to plan what how these products can be recycled in a clever way. The capability is very good, as it seems to me after reading the text. The human resource programs seem to be fitting and personnel is the most important thing. You can have the best machines, but if nobody knows how to operate them you still have nothing. The stakeholder expectations are very important.
As I know from having shares of different companies for myself, I first of all want a good dividend. And if a company will have to tell me that they cannot pay me a good dividend, I want to see why and what is done to improve the situation. In the text you can see that Electrolux is removing a plant from the US to Mexico what will help to save costs but will also be expensive at the moment of the decision because of building a new plant and moving from Greenville to Juarez. The most important factors for me are the staff, the staff and the staff.
When I have great knowledge inside my company I will have to problems to cope with different situations and this will help to be a good competitor on the market and as a result of that I will have enough money to invest and pay good wages. Good wages will help to keep my staff and improve the knowledge. This will secure the future for my company. Question 4: Think about strategic choices for the company in relation to the issues raised in section 1. 3. 2. The strategic choice of buying other companies like Zanussi, Poulan/Weed Eater and AEG Hausgerate is a very important fact to ensure the future competitiveness.
The knowledge of these companies will be part of Electrolux and will help to ensure the development of new products. It also helps to diversify the price strategy. It is possible to let the brands stay alive, reduce the costs in the background and share the knowledge. The prices for one and the same product, for example a washing machine, can be very different even if it is the same producer. So Electrolux can produce more and open up more market segments. Question 5: What are the main issues about strategy into action that might determine the success or failure of Electrolux’strategies? (Refer to section 1. 3. 3. ) To ensure that strategies will be overtaken in the future is a very difficult point. First of all you have to have a good process where the responsibilities are clear. After having a good process you will have to relationships and organizational structures. Bureaucracy can be a banana skin on the way to excellence. Improvements will not be possible to implement in the future when there is no chance for your staff to handle the work amount. So check your resources before you plan to change things.
Here we also have the problem of the financial sector, you cannot plan something that is too expensive, for example the problem of too less electricity in China. You will not solve that problem through building a new energy plant in the neighborhood. The last point is the acceptance of your people. You can plan a lot of improvements but if these points will worsen up the situation for your staff, you will face trouble. In the text it is mentioned that in the plant in Nuremberg in Germany they had a strike, because of the plans to close it. Therefore the improvement for Electrolux is a very bad situation for the staff in Germany.
