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Executive Summary Electrolux is one of the world’s largest producers of domestic & professional appliances for the kitchen, cleaning, & outdoor use. The company wants to be the appliance company in the eyes of the customers, employees & shareholders. This report will talk about the Electrolux and the strategies that have been introduced by Electrolux’s new CEO. The objectives of this report are:

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To find out the strategic issues at Electrolux.

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To find how Electrolux can gain and retain a competitive advantage.

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To figure out the corporate and business strategic moves of Electrolux.

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To identify issues that may occur in implementing strategies.

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To provide solutions to the strategic issues.

This report‘s key findings are: 

This report found that the strategic issues are that there are too many strategies implemented at the same time & that the strategies contradict each other.

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The strategic capability of the organization is made up of the resources and competences of a company. How Electrolux can gain a competitive advantage is by proper use of resources.

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The corporate level strategies were identified as the acquisition of the 59 companies in 1970’s and the business level strategies were identified as intensified product renewal.

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The issues in implementing a strategy were identified using the McKinsey 7S framework.

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The proposed strategies are to plan the strategy implementation periods and focus on the most important strategies first.

Table of Contents Executive Summary...................................................................................................................1 List of Figures............................................................................................................................2 List of Tables..............................................................................................................................2 1.0 Introduction..........................................................................................................................2 1.1 Company Background......................................................................................................2 1.2 Company Vision...............................................................................................................3 1.3 Strategic Overview at Electrolux.....................................................................................3 2.0 Strategic Issues at Electrolux...............................................................................................4 3.0 Strategic Capability & Competitive Advantage...................................................................7 3.1 Value of Strategic Capabilities.........................................................................................7 4.0 Sustaining the Competitive advantage at Electrolux...........................................................9 5.0 Levels of Strategy at Electrolux.........................................................................................10 5.1 Corporate Level Strategy...............................................................................................10 5.2 Business Level Strategy.................................................................................................10 5.3 Functional Level Strategy..............................................................................................11 6.0 Issues in Strategy Implementation.....................................................................................12 7.0 Proposed Strategies for Electrolux.....................................................................................14 References................................................................................................................................15

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List of Figures Figure 1 - Electrolux Logo.........................................................................................................2 Figure 2 - Strategies at Electrolux..............................................................................................3 Figure 3 - Characteristics of a Strategic Decision......................................................................4 Figure 4 - Porter's Value chain Model........................................................................................7 Figure 5 - VRIN Framework......................................................................................................9 Figure 6 - Levels of Strategy....................................................................................................10 Figure 7 - McKinsey 7S Framework........................................................................................12

List of Tables Table 1- Strategic Issues at Electrolux.......................................................................................6 Table 2 - Porter’s Value Chain...................................................................................................8 Table 3 - McKinsey 7S Framework.........................................................................................13

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1.0 Introduction 1.1 Company Background Electrolux is one of the world’s largest producer of domestic & professional appliances for the kitchen, cleaning and outdoor use. Founded in 1919, Electrolux has been developing into a global leader in home appliances, selling more than 50 million products in more than 150 countries every year. The company has many esteemed brands such as Electrolux, AEG, Zanussi, Frigidaire and Electrolux Grand Cuisine (Electroluxgroup.com, 2017). Figure 1 - Electrolux Logo

Source: (Electroluxgroup.com, 2017)

1.2 Company Vision “Be the best appliance company in the world as measured by customers, employees, and shareholders.” (Electroluxgroup.com, 2017)

1.3 Strategic Overview at Electrolux “Strategy is the direction and scope of an organization over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations.”(Johnson et al., 2008) From the Electrolux company website, we can see that they believe that by following these 4 strategies that they will be able to achieve their vision of becoming the best appliance company in the world. The four strategies can be seen in the diagram below.

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Figure 2 - Strategies at Electrolux

Source: (Electroluxgroup.com, 2017)

Electrolux believes that through profitable growth, innovative products, strong brands, operational excellence and dedicated people they will be achieve their vision and become the best appliance producing company in the world.

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2.0 Strategic Issues at Electrolux As stated above strategy is the direction and scope of an organization, which achieves advantage in the long term. As we can see from above Electrolux follows 4 main strategies: profitable growth, innovation, operational excellence, people & leadership. But to make a very a strong strategic decision about which strategy is going to be used, the following characteristics need to be looked at. Figure 3 - Characteristics of a Strategic Decision

Source: (Johnson et al., 2008)

From these characteristics we can see that Electrolux has many issues in their strategy. The strategic issues at Electrolux have been identified as: 

There are too many strategies implemented at the same time.



The strategies contradict each other.

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Table 1- Strategic Issues at Electrolux

Strategic Issue

Explanation

Advantages of the

Disadvantages of

Strategy

the Strategy

The CEO has implemented too many strategies at the Too many strategies implemented at the same time

same time, so that he can achieve the company goal quicker. But in turn losing focus on the most important strategies that

Will be able to achieve a lot of

When focusing on

goals more easily

too many strategies,

and in a short

they may lose focus

period of time if

and goals will not be

strategies are

met.

effective.

need to be implemented.

The strategies that are implemented have

When strategies

conflicts as they contradict

contradict

each other. Such as when they move production to a

Strategies contradict each other

each other, they can identify

low cost company, they

which

won’t be able to cater to

strategies

customer needs at a faster speed, quality of the work

each other and the aims/ objectives of each strategy will not be reached.

to implement together,

is also at risk as low cost country worker may not

They contradict

and what would be most

produce quality work.

efficient

Therefore, moving to low

implemented

cost country and building

together.

Have to redesign strategies so that they do contradict each other.

strong global brand clash. Source: Electrolux Case Study (2005), (AB Electrolux (publ), 2005 From what was discovered, we can see that the strategic issues that have risen is due to the new CEO trying to implement multiple strategies all at once.

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3.0 Strategic Capability & Competitive Advantage According to (Johnson et al., 2008) Strategic capability is that the resource and competencies of an organization are needed for them to survive and succeed. Strategic capability will understand how some companies can perform superior to others. The resources of a company are very important, but how it is used is more important as a proper allocation of resources may affect the competitive advantage. If the aim of the company is to gain a competitive advantage, then the question is what strategic capabilities will provide the competitive advantage. And Electrolux wants to gain a competitive edge, therefore the strategic capabilities and the value of them will be discussed below.

3.1 Value of Strategic Capabilities A company needs to know that if they want to achieve competitive advantage, then they must have capabilities that are of importance/value to the customers. To find out the capabilities of importance to customers, managers need to identify which of their activities provide such value. (Johnson et al., 2008) To understand this, we will look at Porter’s value chain model that identifies all the activities in and around the company that are associated with adding value and/or creating a product. The value chain model can be seen in the diagram below. Figure 4 - Porter's Value chain Model

Source: (Johnson et al., 2008)

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Table 2 - Porter’s Value Chain

Activity

Description in relation to Case of Electrolux

Inbound

The resources are brought in to Electrolux production without

Logistics

any issue, the process is done moderately but this process can be done more efficiently & effectively.

Primary

Operations

Operations of the production process are done without any hassle and there is no issues as new operations are also

Activity

introduced to help employees achieve sustainability goals. Since this process is done without any issue, it can be considered as a value adding activity. Outbound

The finished products are being transported to their retailer

Logistics

and stores and since they are planning on making logistics more efficient, delivery accuracy will increase.

Marketing & The marketing and sales of Electrolux are done well, we can Sales

see that from the figures such as 40 million products sold

Service

annually in 150 countries. The service of Electrolux is bad as they invest most of their money in product development and not provide service to the

Firm

customer. Electrolux is moving all of their production plants to low cost

Infrastructure countries, all factories in high cost countries and new ones Support

were built in low cost countries. Building a state of the art

Activity

production unit for the north American market. Human

The HRM processes at Electrolux is not balanced as it had to

Resource

cut down their worker’s without managing them, they had to

Management

cut down from 70,000 employees to 57,000 employees.

Technology

The technology development is very good at Electrolux as

Development

they have invested SEK 500 million in research and

Procurement

development. This will create value for the company. The procurement activities are also done moderately and is trying to introduce to improve efficiency by having better coordination at a global level.

Source: Electrolux Case Study (2005), (Johnson et al., 2008), (AB Electrolux (publ), 2005)

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4.0 Sustaining the Competitive advantage at Electrolux According to (Barney, 1991) to understand the source of sustained/retaining the competitive advantage, a theoretical framework must be made. The VRIN framework was introduced by (Barney, 1991) to help determine if a resource is a source of sustained competitive advantage. The VRIN framework consisted of the four important factors that determine the sustainability of the resource, they are: Value, rarity, inimitable & non-substitutable. The four factors are explained below. Figure 5 - VRIN Framework

Source: (Barney, 1991) Therefore, for a company to retain their competitive advantage they must be able to manage their resources in a way that it complies with the VRIN framework.

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5.0 Levels of Strategy at Electrolux There are many different levels of strategy in every company. The different levels of strategies in an organization can be seen in the diagram below. Figure 6 - Levels of Strategy

Source: (Karami, 2007)

5.1 Corporate Level Strategy Corporate Strategy explains the overall activities of an organization and how value is added to the different business units of the organization. (Karami, 2007) According to (Johnson et al., 2008) corporate level strategies may include issues such as geographical coverage, diversity of products/services or business unit and how resources are allocated in an organization. The corporate level strategies or corporate strategic moves that occurred at Electrolux is the acquisition of 59 companies in the 1970’s, which resulted in 75 % of Electrolux’s total sales outside of Sweden. Another strategic move is the move of the production from high cost countries to low cost countries, the move of closing down all the plants in the high cost countries and opening new ones in low cost countries can be seen as a corporate level strategy.

5.2 Business Level Strategy Business Level Strategy is about how a company should compete in their particular markets, this will indicate what type of strategies are used to compete in a particular market. (Johnson et al., 2008) The things that will be included here will be the pricing strategies, whether to use differentiation or cost leadership, etc.

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The business level strategic moves at Electrolux is the intensified product renewal, the number of product launches rose from 200 in 2002 to around 370 in 2005. This can be seen as a business level strategy as product renewal helps a company compete in the market. Another strategic move is the implementation of the significant price premium which will lead to a sustainable long term increase in margins. The price premium will affect negatively on the market as an increased price will make the companies look expensive next to the competitor’s products.

5.3 Functional Level Strategy Functional Level Strategy is about the major functional departments within the business unit. (Mukherjee & Basu, 2005) The functional level strategies will include research & development, finance, marketing & manufacturing. The functional level strategic moves are the rise in the investment in Research & development by SEK 500 million over the past 3 years. This rise in investment in R&D has resulted in the increased product renewals, which has had a positive effect on the company. The move of the production plants from high cost to low cost will be entered here as well because this affects the manufacturing strategies of the company.

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6.0 Issues in Strategy Implementation Putting strategies into action and actually implementing the strategies is a different story, there are many factors to consider when implementing a strategy. To look at the factors involved in strategy implementation, we will look at McKinsey’s 7-S framework. The McKinsey 7-S framework is a diagnostic management tool used to test a company’s strategic decision between a firms current & proposed strategy. (Fleisher & Bensoussan, 2015)

Figure 7 - McKinsey 7S Framework

Source: (Fleisher & Bensoussan, 2015)

The elements of the 7-S framework can be divided into 2, hard elements & soft elements. The hard elements are strategy, structure, systems. The softer elements are staff, style, skills & shared values. (Fleisher & Bensoussan, 2015) The hard elements will directly affect the management of Electrolux whereas the soft elements are more difficult to describe as they are intangible & more influenced by culture.

Table 3 - McKinsey 7S Framework

Factor

Description in relation to case of Electrolux

Strategy

 The main purpose of Electrolux is to gain a higher competitive advantage due to the rise in global competition as a result of globalization.  Changing the business model for units considered as non-core operations or profitability was low is outsourced to countries such as China.

Structure

 Demerging of their outdoor product division (Husqvarna) narrowed the structure down as it led to a decrease in workers.  Centralized structure will help the company build up their global brand image.

Systems

 The current systems of Electrolux will include a more efficient method of purchasing, building a strong global brand & intense product renewals.

Staff

 The staff of Electrolux will also improve as there is introduction of talent management processes and tools.

Style

 The style at Electrolux represents a sort of paternalistic/ laissez-faire style, the CEO will send the orders, and the workers will do it in their own way but is inspected on by the CEO.

Skills

 The skills of the employees will also impact on how a strategy will be implemented whether it will be successful or not.  The skills of the employees will be enhanced due to the new talent management processes.

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Shared Values

 The Shared values of the organization will affect the implementation process as some of the values may clash with one of the strategies.  Electrolux has a culture that is result oriented, this is good as they can focus on sustainability of competitive advantage and it will fit into the overall company strategy.

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