stratetig competition ELECTROLUX

Topics: Strategic management, Electrolux, Whirlpool Corporation Pages: 7 (2310 words) Published: October 22, 2013
onducting the strategic analysis of AB Electrolux, it is assumed that it must be analyzed in both business level and corporate level since the company’s strategy path is towards becoming the leader in household appliance industry while competing with the first leader in the industry Whirlpool Corporation and other dominating companies such as GE Appliances and LG Electronics. It is obvious that Electrolux managed to be globally successful focussed on sustainability matters and consumer needs without compromising on a low cost product variety, instead it has been focussing on producing quality in its products and managed to enter into a premium market of household appliances. The strongest sector of profitability and sales for 2009 was consumer durables in Europe and North America as Appendix 4 presents. Consumer durables are the most successful department with revenue amounting to 93% of overall revenue for 2009, leaving professional products revenue only 7%. Another consequence of the global recession was the fall in the share price of Electrolux. In determining whether Electrolux strategy is sustainable, one useful tool is SWOT Analysis. This analysis is useful to analyze the environment of the company and its strategic capability that affect business strategy planning. STRENGTHS:

The company is focussed on sustainability issues (e.g. “green range” products). It relocated 60% of manufacturing to Mexico and China which are low cost countries. Additionally, it has strong sustainability initiatives. It managed to gain energy savings of up to $100 million a year. Electrolux managed to produce efficient products with low energy and environmentally friendly (e.g. AEG-Electrolux Super-Eco washing machine, Lagoon and Inspiro oven). Electrolux managed to increase its operating profit margin with firstly achieving low suppliers and production costs. Electrolux achieved a more “comprehensive thinking” when expansion, based not only on low prices but make evaluations of labour and transportation costs, access to new suppliers and the extend of growing markets. The company’s strategy also contains locating to medium or high cost companies due to taking advantage of the technology evolution of those countries (e.g. Europe). In terms of marketing, the company managed to keep its high prices through global recession in 2009 both in Europe and America. Also, the company’s marketing is strong including door to door sales and product development process (Appendix 5). WEAKNESSES:

Financial results showed an operating profit margin of 4.82% far lower than industry’s of 8.42%. Although Electrolux made some effort increasing its operating margin (having a target of 6%) still is very low due to the fact that inventory is stuck in warehouses. Furthermore, its profit margin can be punctuated if consumers rely more on lower cost products (e.g. vacuum cleaners). The company has low capacity use up to only 60% whereas it also suffers from adequate overhead costs and costs of sales. Some of the sub-brands of vacuum cleaners that the company holds in its group are more “famous” than premium brands. One example is Frigidaire brand in North America. Door to door sales can be an adverse reputation for a brand image company such as Electrolux taking part in a premium market of household appliances. Electrolux business strategic units fall behind in terms of innovation, value and core competences. In addition, refrigerator sales are at very low levels comparable to competitors. OPPORTUNITIES:

Electrolux already meet some criteria of low energy use and sustainability whereas governments in the near future will impose regulation. Post-recession, credit markets (e.g house buying) will be opened again. Consumers will make a shift from repairing towards purchasing new household appliances. Middle class growth in Asia is an opportunity for...
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