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Strategic Position of Electrolux

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    Axel Wenner-Gren, the founding father of Electrolux, established the principles by which the company still thrives. His dream to improve quality of life has had fundamental impact on homes around the world. Today’s Electrolux, 90 years later, is a global leader in household appliances and appliances for professional use. One of the reasons why the issues facing Electrolux were strategic is the long- term direction. The company put an impact on expansion. By the mid 1930s they had established production outside Sweden in Germany, UK, France, USA, and Australia.

    The strategy was to grow through acquisitions and diversification. There were 59 acquisitions made in 1970s. In the 1990s Leif Johansson expanded into Eastern Europe, Asia and South Africa. Electrolux strategy is the tool for achieving the long-term goal of an operating margin of 6%. Electrolux is therefore focusing first on continuing to reduce production cost. In the interest of creating long-term competitiveness, Electrolux is implementing a comprehensive program for savings in production and purchasing, which involves relocating production to and increasing purchases from low-cost countries.

    The scope of an organisation is its range of products and services Electrolux is providing. It is the larger producer of domestic and professional appliances for the kitchen, cleaning and outdoor use. Electrolux products include refrigerators, dishwashers, washing machines, vacuum cleaners, cookers, chainsaws, lawn mowers, and garden tractors sold under esteemed brands such as Electrolux, AEG-Electrolux, Eureka and Frigidaire. Competitive advantage plays a very vital role at Electrolux. It is a consumer-oriented company in which all product development grows out of insight into consumer needs.

    By increasing their customer insight, they are able to develop even more new products that solve the customer needs and problems. The company understands how to make more environment friendly products. For the customer, choosing an appliance with enhanced environmental performance brings long-term savings. For Electrolux, it means there is a competitive advantage in making consumers aware of the correlation Electrolux’s resource, in a wider sense is everything that an organisation can use to create value for customers including team members, knowledge, capital, material and energy.

    In a narrower sense resource is that which is used in manufacturing, mainly material and energy. In 2008, Electrolux had sales of SEK 105 billion, 55,000 employees and many factories in the world. Apart from the tangible assets such as human resources and financial recourses they have intangible assets such as patents and copy rights for their products. The values and expectations of power players in the company such as Chef Executive Hans Straberg would like to intensify their efforts in product development and brand building, based on better insights consumer needs.

    He is convinced that this is the way to achieve sustainable profitability and growth. Their mission is to be the world leader in profitably marketing innovative product and service solutions 2. Identify the main factors about strategic position of Electrolux. List these separately under environment, capability and expectations. What are the most important factors? Strategic position is concerned with the impact on strategy of the external environment, an organisation’s strategic capability, and the expectations and influence of stakeholders (Gerry Johnson and Kevan Scholes, 2002).

    Environment is complex and changing by diversified environmental variables. Many of those variables will become the sources of competition, as well as give rise to opportunities and other will exert threats on the organization or both. The environment of Electrolux will be examined by PESTLE analysis. The acronym PESTLE stands for: Political, Economic, Sociological, Technological, Legal and Environmental. In today’s business world, political factors can influence the way in which a business works. Political factors include current taxation policy, future taxation policy, and the current and future political support.

    In terms of economic data, a PESTLE analysis is beneficial to determine whether or not economic goals are being met. After Second World War the strength of consumer spending on domestic appliances has increased. Since the 1990s, Electrolux has gone through a period of growth and acquisitions, which has led to a growth of sales. When considering Sociological factors Electrolux takes into consideration demographics (such as age structure of the population, gender, family size and composition), lifestyle patterns and changes (e. g. ome working, single households), attitudes to work and leisure and living conditions (e. g. housing amenities, pollution). As standards of living improve, more household appliances will serve more homes in the world. Another important feature is a customer safety. Electrolux is a leader in developing products with child-safety features, often before their competitors or legislative requirements. These are the ways in which changes in society affect the organization. Technological factors include relevant current and future technology innovations, the level of research funding, energy use and cost.

    At Electrolux, product development is a core process, and innovation is a key. The company develops products and services with innovative features and functions, making life easier for their customers and consumers. The legal factor is the effect of national and world legislation on the organization e. g. legislation in areas such as employment, competition and health & safety, future legislation changes and trading policies. As members of a group with business activities in more than 50 countries around the world, Group companies are subject to a wide range of legal requirements.

    All employees, officers and Board members of the Electrolux Group comply in all their business activities with all applicable laws, rules and regulations. Electrolux Group adopted a Workplace Code of Conduct that defines the minimum acceptable work standards for all people in Electrolux Group and confirms the company’s commitment to act as a responsible employer and a good corporate citizen. The Code of Conduct helps ensure that ‘Made by Electrolux’ means that products have been manufactured with respect and consideration for human rights, health and safety and the environment.

    The last aspect of PESTLE analysis is the environmental issue. Electrolux is completely free of ozone-depleting CFCs in its worldwide operations. Another critical issue for the company is recycling. The company have accepted the financial responsibility for end-of-life disposal of electrical appliances and applaud the EU for choosing market incentives to encourage investment in eco-design of products and efficient recycling systems. Their greatest potential to positively influence the environment is to improve energy efficiency and water use.

    Achieving Electrolux goal for profitable growth requires a strengthened position in the higher price segments, expansion of operations in specific product categories, and higher sales in growth regions. Electrolux’s expectation is to increase sales in growth regions such as Eastern Europe, Latin America and a large portion of Asia. The Group has a strong presence in these regions in terms of sales and production. In emerging markets, demand for modern appliances is showing vigorous growth as disposable income increases and a middle class with strong purchasing power develops.

    The Group’s local presence in the form of production facilities and sales companies together with the wide experience of growth markets generates opportunities for continued expansion. For example, the strong position that Electrolux has achieved for front-loaded washing machines in Southeast Asia is the basis for expanding operations in terms of kitchen appliances. 3. Strategic choices for company Electrolux strategic choices involve understanding the underlying bases for future strategy at both the business unit and corporate levels and the options for developing the strategy in terms of both the directions and methods of development.

    Electrolux made a strategic choice when the company decided to expand and 59 acquisitions were made. Now it is now a global leader in household appliances and appliances for professional use, selling more than 40 million products to customers in more than 150 markets every year. The company focuses on innovations that are thoughtfully designed, based on extensive consumer insight, to meet the real needs of consumers and professionals.

    By offering products and services that consumers prefer, which benefit both people and the environment, and for which consumers are willing to pay higher prices, Electrolux can achieve profitable growth. Innovative products, lower costs and a strong brand enable Electrolux to create a foundation for improved profitability. Electrolux works continuously on identifying product categories with potential for rapid and profitable growth. The Group’s longstanding reputation for a proactive approach to sustainability contributes to a successful launch of new products that consume less energy and water.

    Sales and profitability for products with the highest energy-efficiency – the Green range – are closely monitored and show a more profitable trend than Group products as a whole. Straberg knows that product innovation is a key to profitable growth as consumers have demonstrated their willingness to spend more for products that meet their needs and preferences. He has committed to increase investment in product development from one percent to about two percent of sales over the coming years. In 2006, Electrolux had increased investments in product development to 1. percent of sales In addition, certain product segments show much higher growth than the corresponding product category in general. Over the last few years, sales of frost-free freezers and front-loaded washing machines have increased more than overall growth for freezers and washing machines. Its new corporate strategy is to exploit its global capability, building on the strength of the Electrolux brand by listening to and providing what its customers want. The company continues to work intensively on improving profitability.

    On the basis of a competitive production system, among others, strong investments in new products for the high-price segments and a strong Electrolux brand will enable the Group to achieve the long-term goal of an operating margin of 6%. “Thinking of you” is the key message in Group market communications. It highlights the strong Electrolux focus on consumers, but the concept of thoughtfulness also refers to employees, suppliers, the environment and other stakeholders that are affected by Group operations.

    The term “Thoughtful Design Innovator” reflects the importance that Electrolux gives to thoughtful design in the development of new products. The products feature design for greater utility, instead of design for its own sake. Group-wide marketing activities are planned at an early stage in the product development process in order to best communicate the product’s functions and benefits. Marketing is coordinated globally and across product categories in the interest of greater efficiency and impact. Investments are targeted to countries with the greatest potential, and are focused on cost-efficient media channels such as PR and the Internet.

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