NATIONAL ECONOMICS UNIVERSITY

BTEC HND IN BUSINESS AND MANAGEMENT

Assignment Answer Sheet

UNIT 7: BUSINESS STRATEGY

Strategy Formation and Planning

Elextrolux Group

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TABLE OF CONTENTSTABLE OF CONTENTS........................................................................................................................2

INTRODUCTION.................................................................................................................. 3

STUDY CONTENTS............................................................................................................. 4PART 1.................................................................................................................................................4

1. Strategy...................................................................................................................................... 42. Stakeholders analysis.......................................................................................................10

PART 2..............................................................................................................................................121. Insight into the Electrolux’ environmental factors..............................................122. Assessing for current situation and positioning Electrolux Company........25

PART 3..............................................................................................................................................291.The current external environment in Vietnam.......................................................292.A strategic plan for Electrolux........................................................................................31

CONCLUSION..................................................................................................................... 32

REFERENCES..................................................................................................................... 33

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INTRODUCTION

Electrolux is 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 comsumer insight, to meet the real needs of consumers

and professionals.

Electrolux products include refrigerators, dishwashers, washing machines, vacuum

cleaners and cookers sold under esteemed brands.

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.

“Thinking of you” expresses the Electrolux offering: To maintain continuous focus

on the consumer, whether it’s a question of product development, design, production,

marketing, logistics or service.

In this report, we will discuss about the in-depth analysis of the Electrolux’s

environment and the detailed strategy of the whole operation in the company.

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STUDY CONTENTS

PART 1

The context of Electrolux business strategy and the significance of stakeholder

analysis.

1. Strategy

1.1 The concept of strategy

Johnson and Scholes defined strategy as: "Strategy is the direction and scope of an

organisation over the long-term: which achieves advantage for the organisation

through its configuration of resources within a

challenging environment, to meet the needs of

markets and to fulfil stakeholder expectations"

(G. Johnson & K. Scholes, Exploring

Corporate Strategy: Text & Cases, 1998).

Strategies exist at several levels in any

organisation, ranging from the whole

organization through to individuals working in

it. Primarily, corporate strategy is concerned

with the overall purpose and scope of the business to meet stakeholder expectations.

This is a crucial level since it is heavily influenced by investors in the business and

acts to guide strategic decision-making throughout the business. Corporate strategy is

often stated explicitly in a mission statement. Secondly, business unit strategy is

concerned more with how a business competes successfully in a particular market. It

concerns strategic decisions about choice of products, meeting needs of customers,

gaining advantage over competitors, exploiting or creating new opportunities etc. And

finally, operational strategy is concerned with how each part of the business is

organised to deliver the corporate and business-unit level strategic direction.

Operational strategy therefore focuses on issues of resources, processes, people, etc.

Strategy is therefore sum up of three important elements: vision, mission and

objective analysis.

In practice, a thorough strategic management process has several steps, shown in

the flow process below:

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Figure 1: Strategy formulation process.

In this case, Electrolux defines obviously a vision, a mission and an overall

objective for its own company.

1.2 Insight into Electrolux’s strategy

a. Electrolux’s vision

To succeed in the long term, businesses need a vision of how they will change and

improve in the future. The vision of the business gives it energy. It helps motivate

employees. It helps set the direction of corporate and marketing strategy.

An effective business vision requires the six following components to achieve

success, that are providing future direction, expressing a consumer benefit, realistic,

motivating employees, fully communicated and consistently followed and measured.

Primarily, in the mid - 2000s, Electrolux focuses on issuing the future direction for

the best workforce – an significant internal factor - in the organization. The Electrolux

People Vision is to have an innovative culture with diverse, outstanding employees

that drive changes and go beyond in delivering

on the Group’s strategy and performance

objectives. The Electrolux culture features

diversity and innovation. Development of

innovative products is a vital part of it.

Diversity is a prerequisite for the company’s

ability to compete in a global market.

Personnel with diverse backgrounds create greater understanding of consumer needs

in different countries. Electrolux has a number of tools that contribute to realization of

the People Vision, including the Talent Management program, succession planning,

the internal Open Labor Market, the web-based Employee Attitude Survey, and

leadership development programs at all levels of management.

The next target that Electrolux direct to is a fully technological life of a large

number of potential customers. Electrolux's vision is of a thoughtful home. A home

where everything is designed with intelligence and understanding. Where everything 5

works beautifully, simply and intuitively. Where people's lives are easy and relaxed.

The company is trying to satisfy its customers’ needs in the best way, expressing the

consumer benefit hospitality.

Currently, Electrolux is implementing to innovate its products for kitchens to a

higher level of gadget technology. And cooking with lasers is the present Electrolux

vision of the future. Designer Ludovic Peperstraete has come up with his “Cooking in

the Future” design, which suggests that 90 years from now we’ll be zapping our

Sunday roast instead of using boring oil or gas or convection ovens. Ludovic wants

to combine three lasers to create the necessary heat to cook the food after informing

the appliance how you want the food cooked. The lasers will then instantly produce

the necessary energy to create your culinary delight. The design even has a specially

designed ventilation system so that our appartment doesn’t end up smelling of grub.

So that is the tough thing Electrolux have to create in the next 90 years.

In overall, the Electrolux Company has been setting up clear visions that fully

comprise of six necessary components, give it the best outlook in the future. The

visions do not only concentrate on the internal factor – employees – but also the

external factor – customers – that give it success. Especially, its vision of product

innovation will create a core competency for the company in a competitive

environment.

b. Electrolux’s mission

Mintzberg defines a mission as follows: “A mission describes the organisation’s

basic function in society, in terms of the products and services it produces for its

customers”.

A mission statement is a statement that defines the essence or purpose of a

company – what it stands for i.e. what major products or services the firm has

intention to offer customers; what the basic beliefs, values, aspiration, and ethical

priorities of the firm are or whether the company take responsibility to social,

community, and environmental concerns, etc. The mission statement also gives

readers a window on the reason for being of the company and was initially designed

as a means by which potential shareholders and investors could understand the

purpose of the company that they were considering investing in.

The mission statement ensures some transparency for investors and employees

alike so they can have some confidence as to any potential use of their resources be

they capital investment or labour. A mission statement is also designed to ensure that

all stakeholders are clear on the overarching purpose of the company so everyone can 6

be focused on the same goals and objectives. When someone reads a mission

statement in a business plan they are looking to get a feel for the range of activities

that the company will focus on, in other words its core purpose and what it stands for.

Mission statements can and do vary in length, content, format, and specificity.

Because a mission statement is often the most visible and public part of the strategic –

management process, it is important that it should includes all of these nine essential

characteristics.

Figure 3: Nine important elements of a mission statement. (D. Fred, Strategic

management: Concepts & Cases, Chapter 2: The business vision and mission, 11th

edition, 2007)

In the case of Electrolux, the company’s mission is to be the world leader in

profitably marketing innovative product and service solutions to real problems,

thereby making the personal and professional lives of our customers easier and more

enjoyable. This Electrolux will achieve through a commitment to driving performance

throughout the entire organization, innovation and marketing – to products and

brands, superior talent management and the Electrolux way of doing things.

It can be observed that the Electrolux’s mission mainly comprise of two elements:

philosophy and self-concept. The basic belief to become the world pioneer in

innovating practical values for the company products is a prior strategy. It rely on

aspirations and ethical idea of Electrolux that is making the personal life of its

customers and consumers easier and enjoyable.

c. Electrolux’s objective

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Objectives are widely defined as minor targets that an organization must achieve to

make its strategy succeed. Strategic objectives are, in general, externally focused and

fall into eight major classifications: Market standing; Innovation; Human resources;

Financial; Physical resources; Productivity; Social responsibility and Profit

requirements - achievement of measurable financial well being and growth.

Objectives can be set at two levels: corporate level and functional level. Both

corporate and functional objectives need to conform to the commonly used SMART

criteria. It is summarised by five essential factors: specific, measurable, achievable,

relevant and time bound.

In this case, Electrolux has set its objectives on the direction that 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%. Electrolux is an innovative, consumer-oriented company

in which all product development grows out of insight into consumer needs.

“Thinking of you” is the basic theme of all operations, from initial contact with a

consumer to installation and service of sold products. Planning of marketing

campaigns is integrated at an early phase of product development, and all activities

are coordinated for maximum impact. This creates a uniform, powerful image of

Electrolux across all product categories and markets. The Electrolux product offering

is improved continuously through identification of rapid growth segments, product

categories, regions and sales channels. 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. In accordance with the established strategy,

Electrolux has implemented extensive changes within floor-care operations as well as

operations in Latin America, Australia, Southeast Asia and Professional Products. A

more efficient marketing organization has been established in Europe. Improved

product offering in the US has enabled an estimated market share of about 5% in the

profitable premium segment. Electrolux strategy is the tool for achieving the long-

term goal of an operating margin of 6%. Electrolux is, therefore, focusing first and

foremost on continuing to reduce production costs, partly through relocating

production to low-cost countries; improving operating income in Europe through a

better product mix and lower costs and strengthening the position in the premium

segment in North America.8

d. Electrolux’ core competencies create competitive advantages

Core competencies are those capabilities

that are critical to a business achieving

competitive advantage. Senior management

cannot focus on all activities of a business

and the competencies required to undertake

them. So the goal is for management to focus

attention on competencies that really affect

competitive advantage. It is suggested that

there are three factors help identify core

competencies in any business and that can be

providing potential access to a wide variety

of markets, making a significant contribution to the perceived customer benefits of the

end product and creating difficulties for competitors to imitate.

Particularly, Electrolux uses its own capacity to combine local products with

globalization of product development and manufacturing. Therefore, it can satisfy any

customers in different market areas simultaneously reducing the production cost to

push up company’s profitability. Moreover, Electrolux has a number of skilled

employees with highly experienced in designing and marketing for the household

applicances. Last but not least, the company utilizes its strong financial resources to

acquiring firms in a vulnerable financial position and lead them back into black

figures using a straight forward approach. Not only does this strategy reinforce the

company image in the global markets but it also mobilizes and takes advantages of

other significant resources as well as expands the current market shares.

All of those core competencies of Electrolux has built a strong competive

advantage against other companies, to be the world largest manufacturer of high

quality white goods mainly in Europe and North America and to be a friendly

company knowing the customers’ different needs in many countries.

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2. Stakeholders analysis

2.1 The concept of stakeholder and the significant role of stakeholder in an

organization

A “stakeholder” can be defined as: Any individual, group, or institution who has a

vested interest in the natural resources of the project area and/or who potentially will

be affected by project activities and have something to gain or lose if conditions

change or stay the same.

Stakeholders are all those who need to be considered in achieving project goals and

whose

participation and support are crucial to its success. Thereby, in an organization,

stakeholders take into account of two primary roles, following each type of

stakeholders (internal, connected and external), that are performance role and support

role.

Stakeholder analysis identifies all primary and secondary stakeholders who have a

vested interest in the issues with which the project or policy is concerned. The goal of

stakeholder analysis is to develop a strategic view of the human and institutional

landscape, and the relationships between the different stakeholders and the issues they

care about most.

Ultimately, all projects depend on selecting stakeholders with whom they can jointly

work towards goals that will reduce or reverse the threats to company’s key

conservation targets.

A stakeholder analysis can help a project or programme identify the interests of all

stakeholders who may affect or be affected by the project; opportunities and

relationships that can be built on during implementation; groups that should be

encouraged to participate in different stages of the project; appropriate strategies and

approaches for stakeholder engagement; and ways to reduce negative impacts on

vulnerable and disadvantaged groups. The full participation of stakeholders in both

project design and implementation of is a key to success. Stakeholder participation

gives people some say over how projects or policies may affect their lives and builds

capacity and enhances responsibility.

2.2 Electrolux’s stakeholders and the benefits they contribute for the company

In Electrolux situation, engagement between stakeholders of the company brings a

better business. Accountability to Electrolux stakeholders – consumers, customers,

employees, shareholders and others affected by the Group’s operations – involves 10

sharing insights and addressing concerns. Understanding consumers is the basis for

the Electrolux brand promise “Thinking of you”. Consumer insight is decisive for

both the business strategy and product development. Comprehensive interviews and

visits to households throughout the world enable the Group to identify global trends

in society and respond to them in the product offering.

Otherwise, strong and long-term relationships with retailers are also central to the

business model. Sustainability related issues are an important part of the dialogue

with customers. Electrolux has long cooperated informally with retailers to promote

environmentally-sound purchasing and enhance awareness. Growing numbers of

customers are stipulating formal commitments to social and environmental

performance standards in their contracts.

Last but not least, the Electrolux staff (employees) for Sustainability Affairs is

responsible for Group dialogue with internal and external stakeholders on

sustainability-related issues. Identification and selection of stakeholders are based

primarily on the bearing of such groups on issues that are central to operations.

Stakeholders include environmental organizations such as the Worldwide Fund for

Nature (WWF) for climate change, Greenpeace for producer responsibility and

Business for Social Responsibility for effective supply-chain management. Electrolux

also maintains a continuous dialogue with representatives from governments and

inter-governmental organizations.

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PART 2

Electrolux’s internal and external elements and apply strategic positioning

techniques to the analysis of Electrolux.

1. Insight into the Electrolux’ environmental factors

1.1 The external environment

The external organization comprises of all the entities that exist outside its

boundary, but have significant influence on its growth and survival. An organization

has no control over its environment but needs to constantly monitor and adapt to these

external changes, a proactive or reactive response leads to significantly different

outcome.

Figure 2: Elements of external environment.

There are different ways of classifying the types of external environment that

usually just reflect the preferences of different authors, but there are some core types

which are always identified. It can be reflect in two main core analysis: PESTEL

analysis and Porter’s five forces.

1.1.1 PESTEL analysis

There are many factors in the macro environment that will effect the decisions of

the managers of any organisation. Tax changes, new laws, trade barriers, demographic

change and government policy changes are all examples of macro change. To help

analyse these factors managers can categorise them using the PESTEL model. This

classification distinguishes between political factors, economic factors, social factors,

technological factors, environmental factors and legal factors.

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Primary, political decisions can impact on many vital areas for business such as the

education of the workforce, the health of the nation and the quality of the

infrastructure of the economy such as the road and rail system. Secondly, the basis of

global economy nowadays is controlled by a monetary system which includes interest

rates, taxation charges, exchange rates, inflation, deflation, etc. Thereby, changes in

economic factors can have a major impact on a firm’s operations, for instance, higher

interest rates may affect investment because it costs more to borrow; inflation may

provoke higher wage demands from employees and raise costs; or higher national

income growth may boost demand for a firm's products. Others than that, changes in

social trends can impact on the demand for a firm's products and the availability and

willingness of individuals to work. Fourthly, new technologies create new products

and new processes. Online shopping, bar coding and computer aided design are all

improvements to the way we do business as a result of better technology. Technology

can reduce costs, improve quality and lead to innovation. These developments can

benefit consumers as well as the organisations providing the products. Next,

environmental factors include the weather and climate changes can impact on many

industries including farming, tourism and insurance. With major climate changes

occurring due to global warming and with greater environmental awareness this

external factor is becoming a significant issue for firms to consider. Generally, most

of the largest companies move towards more environmentally friendly products –

green products - and processes is affecting demand patterns and creating business

opportunities. Finally, these are related to the legal environment in which firms

operate. Legal changes can affect a firm's costs and demand. By now, we will going

to analyze deeply to the Electrolux external factors related to the operations of

company.

a. Political factors

As in Electrolux scenario, started business in Sweden – a developed country in EU,

the company has many opportunities to produce and develop its innovative products

in both domestic market and international markets. Sweden, a neutral country, with a

long-standing development of monetary policy and a consistent politic has created a

convenience business environment for the whole domestic company, in common, and

for the Electrolux Company, in particularly. Simultaneously, in 1900s’ Sweden

government has strongly invested in science and technology, thereby to 1920s’ the

early growth of Electrolux was built around an expertise in industrial design creating

the leading products in refrigeration and vacuum clean ing. Along with that 13

development, the government has also facilitated firms in open policies. Sweden

policies increasingly involve cross-border issues that have international effects. The

need of coherence and cooperation between policy areas to deal with these common

challenges has never been greater than before. Development policy concerns all of

Sweden. The policy for global development and its overall objective - to contribute to

equitable and sustainable global development - remains firm. Therefore, by the mid-

1930s, the company had also established production outside Sweden in Germany, UK,

France, USA and Australia.

b. Economical factors

To the economical factors, as the economy growth rapidly in 1990s, the economy,

meanwhile, turned in an increasingly healthy performance as the 1990s progressed.

With the fall of the Soviet Union and Eastern European communism in the late 1980s,

trade opportunities expanded greatly. Technological developments brought a wide

range of sophisticated new electronic products. Innovations in telecommunications

and computer networking spawned a vast computer hardware and software industry

and revolutionized the way many industries operate. The economy grew rapidly, and

corporate earnings rose rapidly. Combined with low inflation and low unemployment,

strong profits added substantially to the wealth of many - though not all - companies.

Not except for Electrolux, the growth of global economy and through a series of

acquisitions in EU accompany with the expansion in Eastern Europe, Asia and South

America had pushed the company’s revenue upto 75 per cent outside Sweden.

c. Social factors

The main focus of Electrolux Company is understanding consumer needs and

problems related to household and garden work. By increasing their consumer insight,

the company is able to develop even more new products that solve these needs and

problems. Because of that, though if there is a minor change in social behaviour of

customer at work in households, that will lead to the changes in the idea to innovate

its products to satisfy customers.

Others than that, in the modern life, everyone orients to a better global, everything

goes green. Therefore, with Electrolux orientation becoming increasingly global, the

company aspiration is for the imprint it leave to be a positive one—environmentally,

socially and ethically. The company approach building a robust and transparent

corporate governance system, company’s products improve everyday life, by better

food hygiene, and less waste, ongoing dialogue with stakeholders on key social

issues, safeguarding the rights of employees and health and safety conditions in 14

manufacturing and the supply chain, as well as being transparent and inclusive on the

impacts of company’s operations on communities.

d. Technological factors

During the 20th century, when Sweden was transformed in record time from a

backward agrarian country into one of the world's strongest, most advanced industrial

nations, there were thus heavy demands for infrastructure, transportation,

communications and technological development. This background is one explanation

for Sweden's sophisticated infrastructure and high degree of technological maturity

today. One of the many eloquent indications of Sweden's internationally recognized

speed in adopting new technology is that in 1900, Stockholm had more telephones —

in absolute numbers — than London, Paris or Berlin. Sweden and the Swedish people

have become so famous for their openness to new technology, new trends and patterns

of behavior and consumption that to a growing extent, the country has come to be

used as a test market by major multinational corporations in the development of new

products and services.

Being inherited from the success of technology in Sweden, in 1920s’ the

compnay’s impressive growth and development started under the leadership of Alex

Wenner – Gren. The early growth was built around an expertise in industrial design

creating the leading products in refrigeration and vacuum cleaning. On that basis,

Electrolux step by step quickly develop to the world’s largest producer of domestic

and professional appliances.

e. Environmental factors

Sweden is a country of vast forests, marvellous archipelagos and clean air. But

there are also severe environmental problems, such as excessively high nutrient levels

in the Baltic Sea, acidification of lakes and land, and continuing exposure to a number

of toxic substances, where the margins between current levels and levels that could

result in adverse health affects are small. Accompany with Sweden environmental

problem is the significant changes in the global climate, especially global warming

phenomenon, that threaten to every creatures living on the planet. It requires any

people, any organizations should have a better behaviour in their activities. Climate

change is a core and highly relevant issue for Electrolux. With their strong focus on

innovation, global presence and broad consumer interface, Electrolux is in a position

to effect positive change. With the biggest environmental impacts occurring during

the product use phase, by far Electrolux greatest potential to reduce CO2 is to sell

energy-lean products. The company’s effort to reduce CO2 tackles energy efficiency 15

of our products. It also focuses on streamlining operations and stimulating a wider

awareness among consumers and decision-makers on the role of efficient appliances.

Therefore, Electrolux Company’s operations need to take an account into the

company’s manufacturing procedures and any products that they create.

Generally, external environmental factors take an important position in the

operations of an organization. They drive the whole vision and the main products or

service the company provide to their customers. Therefore, the Electrolux need

consider all those elements to have a best-fit strategy for the company.

f. Legal factors

The most important global trends in legislation affecting the Electrolux Group

involve energy and water efficiency, recycling and restrictions on the use of

potentially hazardous substances. The Electrolux Group has adopted a forward-

thinking strategy, and participates in continuous dialog with lawmakers and

authorities to promote market-driven systems that stimulate product development. A

number of regulatory instruments are used to limit energy consumption of appliances,

including the EU and North America. More are expected—both in labeling and

minimum energy standards. 

In general, the PESTEL analysis has a significant impact on the strategy as well as

the operations of the Electrolux organization.

1.1.2 Porter’s Five Forces

In five forces analysis, here we only assess the competitive rivalry aspect of

Electrolux due to the information provided. Porter’s model is based on the insight that

a corporate strategy should meet the opportunities and threats in the organizations

external environment. Especially, competitive strategy should base on and

understanding of industry structures and the way they change. Porter has identified

five competitive forces that shape every industry and every market. These forces

determine the intensity of competition and hence the profitability and attractiveness of

an industry. The objective of corporate strategy should be to modify these competitive

forces in a way that improves the position of the organization. Porters model supports

analysis of the driving forces in an industry. Based on the information derived from

the Five Forces Analysis, management can decide how to influence or to exploit

particular characteristics of their industry.

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In the traditional economic model, competition among rival firms drives profits to

zero. But competition is not perfect and firms are not unsophisticated passive price

takers. Rather, firms strive for a competitive advantage over their rivals. The intensity

of rivalry among firms varies across industries, and strategic analysts are interested in

these differences. In pursuing an advantage over its rivals, a firm can choose from

several competitive moves, for example, reducing prices, improving product…etc.

In the Electrolux situation, in any markets the company doing business there

always have a number of major competitors that distribute same types of products to

the particular markets.

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Competitive advantage of Electrolux is that Electrolux occupies a market share of

23-24% which is the 3rd largest in North America and is expected to grow at 5%

mainly from upgradation of appliances through new electronics. The market in Asia-

Pacific, Eastern Africa & Eastern Europe is going to grow by 3.9%. To increase sales

the firm should look at revolutionary ideas in marketing, sales, product development

because the product customers buys shows their personality. Electrolux is trying to

increase global competitiveness through innovative products and speed-to-market. For

this reason Electrolux & Sharp are looking towards product planning, assessment of

products for manufacturing environment friendly frost free refrigerators. A very

different way for increasing market share can be like replacing 15% or 40% of its

product range by a different product range of the same company.

1.2 The internal environment

An organization's internal environment is composed of the elements within the

organization, including current employees, management, and especially corporate

culture, which defines employee behavior. Although some elements affect the

organization as a whole, others affect only the manager. A manager's philosophical or

leadership style directly impacts employees. Traditional managers give explicit

instructions to employees, while progressive managers empower employees to make

many of their own decisions. Changes in philosophy and/or leadership style are under

the control of the manager. Some of the elements that make up the internal

environment can be organization’s mission statement, company policies, formal

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structure, organization culture, organization climate, resources, managerial

philosophy and managerial leadership style.

a. Internal resources

Qualifying human resource and material resources in a manufacturing company as

Electrolux Company is indeed important to create a cost efficient and low complexity

in organization’s performance control. It goes along with improving products quality

and innovations to generate a huge profitability for Electrolux.

In this case, in term of material resources, an important factor in the company’s

choice of materials is to eliminate and avoid adverse health, safety and environmental

impacts. In order to ensure that the materials going into Electrolux products are

sustainable and sound, the company optimize material use in the manufacturing of our

products for resource efficiency and easy recyclability. The company sets out a

department - Restricted Materials List - defines which chemicals are banned and

restricted in the products. More than that, the company’s chemicals management

system outlines how to handle chemicals used in the production of our products. It is a

part of the ISO 14001 certification process. And finally, Electrolux has set the same

legislation in every country such as EU, China, Japan and the US where its branches

are operating. Direct material input consists mainly of steel, plastics and components.

Material utilization in production is continually improving, while hazardous waste

and waste to land-fill are being reduced year to year. All hazardous waste (mainly

oils, solvents and other chemicals) is managed in accordance to local regulations.

Electrolux manufacturing is the final phase in a chain of suppliers.

Not only does the products’ materials contribute to the exist reason of Electrolux

company but human resources (HR) also be a vital element that directly operate,

control and manage all the activities in the company. At present, the world leader in

appliances position will be responsible by a full range of human resources and support

to the Electrolux organisation, an international matrix organisation with 600

employees in 37 countries with many international reporting lines entailing remote

management of teams. All the employees in the company are expected to coordinate

all aspects with human resources as well as to ensure that all the group human

resources policies and procedures are implemented and adhered to, with the aim of

ensuring the equal treatment of staff across borders. Working in HR within Electrolux

gives great opportunity for personal development. HR manager will provide operative

and strategic HR support to the line managers and staff worldwide ensuring timely

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and cost effective solutions that enable line managers and employees to improve

individual, team and business performance.

b. Product fortfolio

In basic, a product portfolio is defined as the range of products which is being

offered by the firm to its market targeted. Product portfolio management gives

organizations the ability to drive the utmost value from their product portfolios by

applying portfolio management principles to the product development process to

enable more predictable execution through centralized product planning and financial

transparency throughout product lifecycles. Leveraging product portfolio allows

organizations to improve product decision making and development performance to

achieve higher revenues. Having historical information on the cost and effort to get a

product to market is valuable information that can drive efficiencies and improve time

to market for future products.

From a life cycle analysis and a transparency product portfolio, the Electrolux

Company understand that its greatest potential to positively impact the environment is

to improve efficiency of products during use. It understand there is a market for

products with high levels of energy efficiency and low environmental impact. More

than that, Electrolux’s consumers want appliances that are safe, do not contain

hazardous materials, have low noise levels and are produced under good working

conditions. Well-designed standards transform markets by empowering consumers to

make informed purchases and to manage the customers’ energy bills. This is why

Electrolux advocates the use of energy labeling. Electrolux measures energy

efficiency improvements of our entire product range in Europe. In order to help

consumers buy our most energy-efficient, climate-friendly appliances, every business

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sector is raising the profile of their top performing appliances. Therefore Electrolux

has organized products portfolio in a best way to control its inventions efficiency as

well as serve better for the needs and wants of different customers in alternative

market segments.

c. Activities and value chain

Electrolux activities of its value chain consist of many processes accompany with

the support of the 4 main other departments to create a new product.

Primarily, in strategic market plan, the company identified opportunity areas

within the consumer themes, clarified aspiration and draw a strategic road map,

detailed a long-term generation plan. Secondly, Consumer opportunity step is a deep

understanding of consumer needs, wants and desires simultaneously with the early

rough assessment of business opportunities. Next, primary development standardized

technical solutions within innovation themes as well as provide technical solutions to

urgent problem areas. Concept development includes feasible concept addressing the

identified needs, distinct positioning, consume value-based pricing and solid business

case. Fourthly, Electrolux execute their product development step with cost efficient

product specification and design, great manufacturability. Before range management

and phase out, commercial launch preparation and execution is necessarily important

to clear launch window target, effective range roll-out, tailored communication,

strong in-store execution and consistent follow-up. Finally, the company optimal total

product portfolio, ongoing review and improvement of performance accompany with

optimal processes for phase in and phase out.

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To an ancient company like Electrolux, they has enough experience to build up an

optimal process of manufacturing that compatible with the company’s resources and

organizational development.

d. Organizational structure

Organizational structure is the formal system of task and reporting relationships

that controls, coordinates, and motivates employees so that they cooperate to achieve

an organization's goals.

After a series of acquisitions in Europe and disposing of many of the unrelated

industrial activities in order to restructure the whole organization, Electrolux

Company is such a complex group which clearly required strutures and process

through which both strategy and operations could be managed. Electrolux operations

are organized in six business sectors that include a total of 25 product lines. There are

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four Group staff units. The Group has a decentralized corporate structure in which

overall management of operative activities is largely performed by sector boards.

Group Management includes the President, the six sector heads, the four Group

staff heads and the head of R&D, Purchasing and Manufacturing within Major

Appliances.

The six sector heads are members of Group Management and have responsibility

for the income statements and balance sheets of their respective sectors. Within Major

Appliances, the business sectors are geographically defined, while the sectors

Professional Products and Floor Care and Small Appliances are global.

The overall management of the sectors is the responsibility of sector boards, which

meet quarterly. The President is the chairman of all sector boards. The sector board

meetings are attended by the President, the management of the respective sectors and

the Chief Financial Officer. The sector boards are responsible for monitoring on-

going operations, establishing strategies, determining sector budgets and making

decisions on major investments.

In the external reporting, the Group’s operations are divided into five business

sectors. Operations within Consumer Durables are divided into four geographic

business areas: Europe, North America, Latin America and Asia/Pacific and Rest of

world. Professional Products is the fifth business area.

e. Customer identity

The customer base is the group of customers and/or consumers that a business

serves. In the most situations, a large part of this group is made up of repeat customers

with a high ratio of purchase over time. These customers are the main source of

consumer spending. In many cases, the customer base is considered the business's

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target market, where customer behaviors are well understood through market research

or past experience. All actions the company takes would be through consideration of

its customer base.

The Electrolux Group has carried out extensive consumer research which describes

the Electrolux brand positioning for different consumer segments. This target

consumer is characterized by a high level of social interaction, large informal

networks, frequent and savvy use of the internet, curiosity and creativity.

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2. Assessing for current situation and positioning Electrolux Company

2.1 SWOT analysis

SWOT analysis is a tool for auditing an organization and its environment. It is the

first stage of planning and helps marketers to focus on key issues. SWOT stands for

strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are

internal factors. Opportunities and threats are external factors.

Below is the tabular describe four element (SWOT) of the Electrolux

Company:

Strengths Weaknesses

1. Well established team of directing managers

2. Experienced in using acquisitions to innovate and to enter new markets

3. Fast integration of bought businesses in Electrolux's value chain

4. Will to dispose non-profit, non-core businesses (selling off idle assets)

5. Localized sales forces6. Subsidiaries as decentralized

profit centers managed by Shareholder Value Approach

7. Highly automated production facilities

8. Lean production using outsourcing for components

9. Dominant player in Nordic countries

10. Small overhead (low vertical differentiation leads to operational empowerment of local subsidiaries). Strategic aspects centralized in headquarters

11. ‘Electrolux Forecasting and Supply System’

12. Good relations with union

1. Diversifying causes sometimes financial problems (risky and high cost)

2. Very high focus on Western Europe and North America - not yet concenstrate in the rest of the world

3. Low integration of production facilities worldwide (market shifts towards low-cost, high-quality products - therefore Electrolux should move from a multi-domestic product strategy to a more global product strategy which combines world-wide economies of scale with products only slightly adapted to local consumer behavior)

4. Bad quality service in some branches.

Opportunities Threats

1. Gaining advantage by being the first operating in a global scale

1. Other competitors chose to move from their domestic

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in this industry2. Increasing business efforts in

expanding markets like Latin America and Far East

3. Product innovation can be an important aspect for global competitiveness

markets to operate in a global scale (e.g. competitors from the USA)

2. Decline in world economy may lead to financial problems (replacement demand of long-lasting consumer goods)

 Through all of the information analized above, the Electrolux managers can create

a reasonable strategy though matching the internal factors (Strength and Weakness) to

the relevant external factors (Opportunity and Threat). For instance, the Electrolux

company can use its well established team of directing managers, its fast intergration

of bought in the Electrolux’s value chain simultaneously combines with the strength

of small overhead control (S1, S3, S10) in order to gain advantage by being the first

operation in a globalscale in this industry (O1).

Others than that, Electrolux is an organization experienced in using acquisitions to

innovate and to enter new markets (S2) as well as a dominant player in Nordic

countries (S9) with a good relationship with union (S12) to catch up the good

opportunity of increasing business efforts in expanding markets like Latin America

and Far East (O2). By this chance, the company can also minimize its weakness in

highly focusing on Western Europe and North America but not yet concentrate in the

rest of the world (W2). The Electrolux’s experiences in acquisitions and merges (S2)

can help the company reduce the thread of other companies choose to move from their

domestic markets to operate in global scale (T1).

The number of best-fit choices does not stop there when there are chances of

product innovation can be an important aspect of global competitiveness (O3).

Electrolux company can hold this opportunity by utilizing its own strengths of high

automated production facilities (S7) and lean product using outsourcing for

components (S8). By that, the company at the same time can decrease its weakness of

Low integration of production facilities worldwide (market shifts towards low-cost,

high-quality products - therefore Electrolux should move from a multi-domestic

product strategy to a more global product strategy which combines world-wide

economies of scale with products only slightly adapted to local consumer behavior)

(W3).

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In overview, the Electrolux has to identify and clarify its SWOT in particularly in

order to maximize its advantages simultaneously minimize the drawbacks in the

organization’s operations effectively.

2.2 Positioning techniques

a. Product-Market Strategy: Direction of growth

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. Although growth in the total market for household

appliances is limited in terms of value, several clear and powerful trends are driving

strong growth in specific product categories, regions and sales channels. Identifying

these trends, will enable Electrolux to improve its product offering and thus create

profitable growth.

To detect obviously which products the Electrolux Company manufactures and the

markets where it sells them to, we use the Ansoff’s Matrix. The Ansoff’s Growth

matrix is a tool that helps businesses decide their product and market growth strategy.

Ansoff’s product-market growth matrix suggests that a business’ attempts to grow

depend on whether it markets new or existing products in new or existing markets.

The output from the Ansoff’s product-market matrix is a number of suggested growth

strategies that set the direction for the business strategy. There are four segments of

the matrix:

Electrolux only focuses on the diversification strategy that includes rapid

expansions in growth regions and developing new product categories.

Primarily, Electrolux will 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

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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.

Secondly, 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. 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.

In overall, Electrolux chooses the diversification strategy to be their priority in

developing the company. However, this leads to the risks and high costs of innovating

new products and penetrating into new markets. Therefore, the company needs take a

consideration into its method of growth to spread out the risks and expanditures.

b. Method of growth

Businesses can grow either organically for example through internal growth where

profits are ploughed back into the business, or through external growth such as

through take-over or merger with another business.

Electrolux's brand includes its namesake, along with Eureka, AEG, Frigidaire,

Kelvinator, Zanussi, Flymo, Weed Eater, and Husqvarna. In 2001, the firm held the

leading market position in North America, Europe, Latin America, and Australia.

Electrolux completed a major restructuring effort in 1999, which left it positioned

with two main business segments: Consumer Durables and Professional Products.

This is a result of a series of acquisitions and merges with other companies. For

instance, in 1919, Lux and Elektromekaniska merge to form Aktiebolaget Elektrolux;

in 1925, the company acquires Arctic, an absorption refrigerator manufacturer; in

1962, ElektroHelios, a Scandinavian market leader in compressor refrigerators and

freezers, is acquired; in 1974, Electrolux purchases United States-based Eureka and

the last in 1984, Zanussi, an Italian household appliance manufacturer, is acquired. 28

So, in general, executing a series of acquisitions and merges in order to restructure

the whole industry of the organization is the right strategic application of Electrolux.

That proves the capabilities of Electrolux’s manager drive the company well in an

competitive environment.

PART 3

The current external environment in Vietnam and a strategic plan for Electrolux.

1. The current external environment in Vietnam

a. Political

Government of Vietnam always consistent policy to attract foreign investment

creates conditions for sustainable development of enterprises. The Government has

issued several mechanisms and policies to support foreign investment enterprises,

promoting production and export, thoroughly apply the tax reduction policy, which

prescribes the tax exemption and reduction of land to build factories, run operations,

company’s net profit tax is exempted for the first three years foreign companies’

investment, exemption for imported materials for five years since starting production.

On the other hand, since 2007 Viet Nam has joined the world trade organization so as

in terms of commitment with WTO, Vietnam cannot apply the policy of protection in

the domestic products by pressuring to the ceiling price and floor price for Foreign

firms investing in Vietnam.

b. Economic

After the economic crisis of 2008, Viet Nam's economy has been reduced but not

falls deeply into recession and tending to increase gradually. Growth domestic

product GDP for six months in 2009 reach 3.9% and the CPI has also grown to nearly

5.58% (Sacombank leasing, 2009).

Besides, average revenue in five years of retail market in Vietnam is about 37

billion dollars, is not a major market in the region, however, it has 20% growth every

year. Although income per capita is in the low category in the world, but Vietnamese

use more than 70% of their income for consumption purposes. A high number

compared to the same the number is 40% in developed countries (SAGA

Communications, 2009).

That all prove the sign for a potential market where employees are available with

low salary requirement and consumers are always ready to buy quality and

reasonable price products which providing them values. However to analyse market

more carefully, we should take a look in the social factors, that directly identify the

buying behavior of Vietnamese customers.29

c. Social

A sociological study recently showed that the number of Vietnamese consumers

accept spending higher than income is used for expensive product and its quality.

Most customers still refer to when purchasing through the sources of information

from newspapers, advertising and friends. The consumer behavior changed from daily

shopping in traditional markets move to purchase large quantities for the entire week

at supermarkets, shopping centers and through the Internet; increase buying value and

use more and more green products, insurance, education ... In addition, Electrolux

needs access to advertise its products’ information through more and more natural

types of mass media, including broadcasting - television, newspapers and the Internet

to satisfy customers’ convenience in finding process for products. That is the problem

of technological influences.

d. Technological factors

Technology is today an important facility to connect customers with company, a

device support for the delivery system more efficiency and effectively. Vietnam

although derived slowly in the past but now it is progressing very quickly and are

positioned over many countries in the area. In 2002, Vietnam ranked 74/75 on the IT

level; Indonesia and the Philippines were put away. However, within a year,

Vietnam’s level of IT rose to 68/102 and beyond two countries above. This work is

based on the criteria: environment, readiness and the use of technology. Further

analysis showed that the change is due to the use of technology in Vietnam, especially

the business sector and government sector.

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2. A strategic plan for Electrolux

Generally, strategic planning determines where an organization is going over the

next year or more and how it's going to get there. Typically, the process is

organization-wide, or focused on a major function such as a division, department or

other major function. Planning typically includes several major activities or steps in

the process. Different companies often have different names for these major activities.

They might even conduct them in a different order. Strategic planning often includes

use of several key terms. Different organizations might use apply different definitions

for these terms, as well.

For the Electrolux detailed strategic plan in Vietnam market areas, through the

basic analysis about four main external factors in the countries, Electrolux company

can pick out some other ideas added to its SWOT board, such as, its experiences in

acquisition and manufacture products as well as well manage the factory overhead can

help company reduce the cost for products. Therefore it will surely satisfy the

Vietnamese customers buying behaviour and income level.

It will be more successful for Electrolux Vietnam if they define the mission

statement and vision statement in more detailed. Electrolux planners should carefully

come to conclusions about what the organization must do as a result of the major

issues and opportunities facing the organization. These conclusions include what

overall accomplishments the organization should achieve, and the overall methods to

achieve the accomplishments. Goals should be designed and worded as much as

possible to be specific, measurable, acceptable to those working to achieve the goals,

realistic, timely, extending the capabilities of those working to achieve the goals, and

rewarding to them, as well.

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CONCLUSION

Electrolux is one of the world's leading international appliance companies. We are

a part in the daily life of hundreds of millions of families around the world. Each year,

some 40 million consumers in more than 150 countries choose our products, such as

cookers and cooktops, ovens, fridges and freezers, dishwashers, washing machines,

tumble dryers, room air conditioners and vacuum cleaners. That translates to two

products bought from us every second, every day of the year. Because of the early

growth in the industry, Electrolux has many strengths and advantage to development

in new markets and innovation new products. However, Electrolux is highly

dependent on the success of the integration of the others company. Therefore the

market entry of potential competitors such might threaten the good position of

Electrolux in the foreign markets. Also a change in replacement demand, e.g. caused

by an economic decline, might create problems for Electrolux. Therefore being able to

adjust production to changing demands, not only in size, but also in structure (design,

more price sensitive customers), is essential for Electrolux. Considering the expected

tough competition in a mature market offering a good localized service will be crucial

to maintain market share. The highly experienced marketing employees of both

companies might help to improve service quality in the consumer market. Good long

lasting relationships with suppliers might help to face the increasing power of

suppliers, which is expected in that industry.

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REFERENCES

BPP Professional Education, 2004. “Chapter 1: OBJECTIVES”, The role and function of objective, Mission, Other Objectives. Mandatory Unit 7 Business Strategy Supporting Foundation Degrees Course Book (1st ed.). pp.4-8; 10-15.

BPP Professional Education, 2004. “Chapter 1: OBJECTIVES”, Stakeholders. Mandatory Unit 7 Business Strategy Supporting Foundation Degrees Course Book (1st ed.). pp.16-18.

BPP Professional Education, 2004. “Chapter 2: THE EXTERNAL ENVIRONMENT”, What is the external environment?. Mandatory Unit 7 Business Strategy Supporting Foundation Degrees Course Book (1st ed.). pp.23-33.

BPP Professional Education, 2004. “Chapter 2: THE EXTERNAL ENVIRONMENT”, Porter’s Five Forces. Mandatory Unit 7 Business Strategy Supporting Foundation Degrees Course Book (1st ed.). pp.38.

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Electrolux, 2009 [internet]. March. Available at: http://www.electrolux.com. [Assess 01 March 2010]

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