Case Electrolux Acquisitions
How has Electrolux’s strategy changed over time? How have these changes affected its direct investment activities?
Electrolux started pursuing international businesses in order to amortize costs and diminish cost of production per units. As a consequence, the company decided to pursue a strategy of horizontal integration through the acquisition of Arthur Martin, Therma, Tappan, Husqvarna. The idea behind the horizontal integration was to conquer new markets by already-established brands and create a global standard production in order to reach economies of scale. IT happens throughout the 1960s and 1970s, and Electrolux would re-sell the business not related to their industry, mainly to remain competitive and focused on their core activities. In 1980s, Electrolux made a move of vertical integration by acquiring the Swedish leader of metal producer and fabricator Granges. It was a move to cut costs and exercise more control over their value chain. Eventually Electrolux resumed into the horizontal integration, becoming one of the largest home appliance manufacturers in the world. Considering international strategies, the company went from a national, to multinational and then reached the global stage of an enterprise, mainly through adding standardized processes and adding value by utilizing the comparative advantage of its markets. The vertical and horizontal integrations strategies directly affected its direct investment activities, as they went on purchasing more than 50 companies in different markets.
What are the main advantages and possible problems of expanding internationally primarily through acquisitions as opposed to building new facilities?
The main advantages of expanding through acquisitions are: the speed to acquire resources and competencies in different markets; the power that established brands already have in those markets as well as distribution networks and knowledge of their home market; the...
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