By 2005, Electrolux was the world's largest producer of domestic and professional appliances,
employing about 70,000 people and generating annual sales of 129 billion Swedish krona.
However, the company faced significant challenges that year, including Whirlpool's acquisition
of Maytag, which boosted Whirlpool's market share, and Electrolux's decision to demerge its
outdoor products division, Husqvarna.
Electrolux's history reflects strategic shifts, particularly under leaders like Alex Wenner-Gren
and Hans Werthén, who expanded the company through numerous acquisitions, resulting in a
significant international presence. By 1990, 75% of sales were outside Sweden, which continued
to grow in the 1990s under Leif Johansson.
In 2005, three critical market trends emerged: increasing global competition, market polarization
with rising demand for both basic and premium products, and consolidation among retailers
favoring large chains. Electrolux’s CEO, Hans Stråberg, emphasized strategies for addressing
these trends, focusing on cost-cutting, product innovation, and strengthening the Electrolux
brand.
Key strategies included:
1. **Managing Underperformers**: Divesting non-core operations.
2. **Low-Cost Production**: Relocating production to countries with lower costs, such as
moving refrigerator production from the US to Mexico.
3. **Efficient Operations**: Enhancing logistics, reducing product platforms, and optimizing
purchasing processes.
4. **Product Renewal**: Increasing product launches based on consumer insights, aiming for
sustained investment in development.
5. **Building a Strong Brand**: Raising brand recognition, which grew from 16% to nearly
50% of sales from 2002 to 2005.
Looking ahead, Stråberg anticipated higher profitability in 2006, new product launches, and
continued relocation of production, while acknowledging potential sales impacts from planned
factory closures and labor strikes. The overarching goal was to solidify Electrolux's position as a
market leader while improving cost efficiency and brand strength.
What are the main issues about strategy into action that might determine the success or failure of
Electrolux’s strategies?
The successful execution of Electrolux's strategies depends on several critical issues:
1. Execution of Cost-Cutting Measures:
- Challenge: Implementing cost reduction strategies without sacrificing product quality or
employee morale. If not managed well, this could lead to reduced consumer trust and brand
reputation.
2. Adapting to Market Changes:
- Challenge: The ability to respond swiftly to changing consumer preferences and market
dynamics. The emergence of new competitors and shifts in retailer power can affect market
positioning.
- Importance: Flexibility in strategy allows Electrolux to capitalize on emerging trends and
avoid being outpaced by competitors.
4. Supply Chain Efficiency:
- Challenge: Optimizing logistics and production processes while managing relationships with
suppliers. Disruptions in the supply chain can lead to delays and increased costs.
- Importance: A robust supply chain supports cost efficiency and timely product launches,
essential for maintaining market competitiveness.
5. Brand Management:
- Challenge: Consistently communicating and reinforcing the Electrolux brand across diverse
markets. Any misalignment can dilute brand equity.
- Importance: A strong brand allows for premium pricing and customer loyalty, crucial for
long-term success.
6. Monitoring and Evaluation:
- Challenge: Establishing effective metrics to evaluate the success of strategic initiatives.
Without proper assessment, it’s difficult to know if strategies are working.
- Importance: Continuous monitoring enables timely adjustments to strategies, ensuring they
remain relevant and effective in a dynamic market.
In summary, these issues underscore the complexity of translating strategic plans into action.
Effective management of these challenges will be critical for Electrolux to achieve its strategic
objectives and maintain its competitive edge in the market.
