Electrolux, page 25-27: 1) Explain why the issues facing Electrolux were strategic? Long-term direction: – More domestic and professional appliances – Shift production to low-cost countries – Close plants that are inefficient – Reduce number of supplies, also purchase more from low-cost countries – Build a strong global brand Scope: – Electrolux focused on its key competences (domestic and professional appliances) – Sold its outdoor division (mowers, chain saws, etc. ) – Want to invest 2% of sales in product development to intensify product renewal and systematic development of brands
Advantages over competitors: – Global, recognized brand Business environment: – Globalization (production in low-cost countries, production costs of all major producers will be the same, therefore more concentration on product development, brand-building, marketing) – Market polarization (demand for basic products and higher-price products increases) – Consolidation of retailers (more business with big chains and fewer traditional dealers) 2) Identify the main factors about the strategic situation of Electrolux. – Globalization Market polarization – Consolidation of retailers – Cost reduction in order to compete with other big companies (Whirlpool) 3) Think about strategic choices for the company in relation to the issues that it has. – Invest more in research and development – Use more economies of scale, reduce number of unique products and increase “platforms” for easy adjustments/diversification of existing products – Find new markets (developing world, BRIC-Countries) Show how the elements of Strategic Management differ in: b) a large multinational business
In a large multinational firm, the strategy needs to consider aspects and local circumstances of not only one country, but all countries they are operating in. When defining the long-term direction of an organization, these different situations (i. e. local business environment, political issues, laws, importance of business location) are not evenly important for the overall success of the company. Also, some parts of the organization have other problems than others, which need to be considered. The scope of activities in a multinational business can be very wide, with production in one country and demand for it in many others.
Additionally, there can be a very diverse product mix, so that the organization needs to focus on keeping it adjusted with their overall long-term direction and if all business units are equally important to achieve this goal. Facing many different fields of competition in many incoherent surroundings is a difficult task. However, as a large multinational company, it can use its bargaining power, market share and economies of scale to improve its advantage in front of competitors. Having a unique product brings special know-how, skills and competences into the business.
Therefore, these resources can be used to improve and develop products, services or whatever the company sells. Considering that an organization like this is part of what makes this world so globalized, it also needs to adapt to changes in its environment, which can be technological, political or influence the business in other ways. In order to stay successful, the company needs to act quickly, but with careful consideration, before the competition has used good opportunities. Since most multinational firms are listed at least on one stock exchange in order to finance their business, the strategy has to include the interests of shareholders.
However, the strategy should not focus on improving share prices on a short term basis, while forgetting about the long-term direction and the possible harm that can be caused by a wrongly focused strategy. Other stakeholders like employees, local communities, etc. also have to be considered, since especially employees are the main factor in generating products and therefore, profits. Deciding on a global strategy for a multinational company is very difficult, complex and need to integrate many different situations and focus areas.