Electrolux Company’s Business Studies and Strategy

Explain the significance of stakeholder analysis by completing a stakeholder audit for Electrolux and, using the stakeholder power/influence grid, indicate the extent that each of the stakeholder groups will need to be considered when developing a strategy

There are quite a number of entities that make up stakeholder groups in most business establishments. To begin with, economic stakeholders are composed of distributors, competitors, and suppliers. These stakeholders can indeed significantly influence all strategic decisions that are usually made within business circles. The five forces framework can also be used to identify their influence. Secondly, we have social/political stakeholders. They are also influential in all strategic decisions made by business entities. They are composed of government agencies, regulators, and several other policymakers. They heavily influence the strategic development of policies in business organizations. Thirdly, technological stakeholders may significantly impact the inception of new industry standards, the establishment of new forms of technological platforms as well as the initiation of new ideas that are instrumental in the overall wellbeing of most business organizations.¹Finally, community stakeholders are made up of individuals or segments of populations that are mainly close to a factory or industrial establishment. The wider society may also be part and parcel of community stakeholders. It is profound to note that all community stakeholders are influenced by the activities or operations of an organization. In most cases, they lack any form of formal relationship with the organization found within their settings. However, they may take decisive action against any organization especially when there is a dispute. Some of the actions that they may be engaged to include activism and lobbying.²

One of the most outstanding stakeholders of Electrolux is the targeted community of consumers who are located in various markets across the world. As a matter of fact, these are society-wide stakeholders bearing in mind that they are the key destination for all products marketed by Electrolux Company. Community stakeholders have myriads of functions and influences that cannot be ignored by Electrolux. For instance, strategic decisions regarding the globalization of the company’s operations must bear in mind the tastes and preferences of the targeted market. When the term globalization is brought into sharp focus, one outstanding factor (which is in this case competition) becomes inevitable.³ A globalized company should root for the best strategies in order to remain competitive. In other words, the competitive advantages of Electrolux ought to be beyond reproach if it desires to capture a larger share of the market. In this regard, it implies that the community stakeholders significantly affect the nature of strategic decisions made by the lead management at Electrolux. In addition, the community stakeholders also determine the tastes and preferences of products manufactured by Electrolux.

Another broad category of stakeholders is those who handle the technological aspects of the company especially in the production process of new and innovative goods. It is imperative to note that Electrolux has been a market leader in the production of professional appliances and domestic goods that are used outdoors. The company has also been keen on manufacturing tools used for internal cleaning of surfaces and kitchen areas. Most of these goods are electronic in nature and therefore, the most appealing designs and technological platforms should be put in place in order to reach out to the wider market

Discuss how the management board of Electrolux might manage the expectations of stakeholders

To begin with, a large organization such as Electrolux has several categories of stakeholders. As such, it may not be easy to harmonize or manage their individual expectations. In any case, any attempt to fully satisfy the expectations of stakeholders in large organizations may end up in gross mess and generation of conflicts. Therefore, it is crucial for the management at Electrolux to seek the most applicable strategies for managing the expectations of stakeholders. In order to achieve the above, the management at Electrolux should consider the category of stakeholders who have the most influence in the operations of the organization. In other terms, stakeholders with high-level expectations should be provided with a detailed operation level of the company.

They should be supplied with updated company records that indicate revenue generation, profitability level, sales forecasting parameters, financial forecasting details as well as precise analysis of all the financial planning aspects of the organization. For instance, analysis tools such as regression analysis and SPSS can be employed for the sole purpose of managing the expectations of stakeholders with a high level of expectations.⁴ Secondly, the lead management team at Electrolux should decide on the type of expectation that can be given additional attention or more emphasis. Hence, stakeholders in all categories should be guided by the management of the most vital elements of the organization that demands keen attention. For example, stakeholders at Electrolux can be made to shift their focus to operational aspects such as financial planning, profitability, growth of revenue, and cutting down operational costs. Lastly, stakeholders’ expectations can be managed by ensuring that the set goals and objectives of the organization are achieved within the given timelines or deadlines.

Produce an organizational audit for Electrolux. This may be done by completing using Porter’s Value Chain to highlight the ways in which recent strategies implemented by Electrolux have enhanced the strategic capabilities of the organization.

Explain how Porter’s Value Chain can be used to analyze the activities that organizations undertake, and the extent to which they add value to the organization

Organizations have the immense capability of creating value. For instance, the Porters value chain can be used to profitably transform business overheads into outputs. In other words, the activities undertaken by an organization can be analyzed using the Porters value chain. When it comes to the process of production, the inputs can be transformed in such a way that they give useful outputs that have higher utilities than the actual raw materials.

Value is usually created by manufacturing firms that convert raw materials into finished and valuable end products. On the same note, consumers purchase the finished products from retailers in the most convenient and appealing manner. In some cases, retailers offer after-sales services to consumers. Some of these services may entail packaging and transportation. The diagram below shows how the Porters value chain can be used to analyze organizational activities.

From the diagram, it can be seen that organizations usually undertake both primary and supportive activities in order to complete the process of production. Some of the primary activities include services, sales and marketing, outbound and inbound logistics as well as general operations. Supportive activities include infrastructure, technological development, human resource development, and procurement. For example, Electrolux managed to make sales to over 150 countries by 2005. In terms of human resource development as a supportive activity, it had about 70,000 workers. Both the inbound and outbound logistical activities ensured safe and timely delivery of products manufactured from various plants.

Develop your own suggestions, using Porters Value Chain as a framework, as to how Electrolux might add value to the activities undertaken by the organization

In terms of operations, Electrolux can embark on a massive innovative process through Research and Development. Since there is an increasing demand for highly-priced goods, it implies that the same goods should be of high standards and extremely appealing to the targeted market. Hence, the production department can employ state-of-the-art technology in order to improve the quality of the transformed raw materials into decent finished products.

Carry out an environmental audit for Electrolux using PESTEL analysis and Porters 5 Forces

The macro environment is obviously the highest layer of operations for any organization operating within an environment. Almost all organizations are usually affected by the activities taking place in a macro environment. The PESTEL analysis explores the political, economic, social, technological, environmental and legal factors that affect an organization as analyzed below:

Political factors

The lead management teams at Electrolux are inevitably encountering various macro-environmental challenges that affect all the decisions made by the company. Some of the political factors entail changes in laws and taxation regimes, government policies, trade barriers and changes in population. The main macro-environment factor affecting the activities of Electrolux is the political factor. Moreover, there are several political decisions that may influence the operations of Electrolux in other areas such as health and education of employees.

Economic factors

There are quite a number of economic factors that may affect the operations of Electrolux. For instance, when taxation regimes are revised upwards, the value of profit after tax definitely does down. This lowers the profitability of the company. On the other hand, when taxation is revised downwards, the expected profit after tax goes up. Secondly, interest rates are also instrumental economic factors that may significantly impede or enhance the growth of revenue at this organization. For instance, lower interest rate on borrowed loan can be a favorable move for Electrolux. On the same note, the fluctuating rates of inflation may jeopardize the production and growth processes of Electrolux. For example, the purchasing power of consumers may be grossly hampered during a rise in inflation index. In the case of manufacturers, a rise in inflation leads to an increase in the cost of production. As a result, the profit margin is equally affected. These factors influence the behavior of an organization by impeding investment activities and also increase the cost of borrowing.

Social factors

One of the social factors affecting Electrolux’s activities is the massive change in the tastes and preferences of consumers. This impacts the profitability of its operations. The aging population usually demonstrates the social trend of buyers when it comes to tastes and preferences. For instance, the old segment of the population may not be in need for highly priced goods as compared to the youthful population.

Technological factors

Electrolux has employed new technological platforms in order to improve the general appeal and likeability of its products. One of the recent developments is the production of goods made of metallic materials to customers who prefer durable and innovative products. The company has also opted for online marketing of its products. As a result, it has already managed to boost the quality, sales and marketing of its products.

Environmental factors

Both the changes in weather and climate have been found to affect the operations and overall profitability of products manufactured from Electrolux. For instance, both the inbound and outbound logistics can be adversely affected by harsh weather conditions..

Legal factors

The operations of Electrolux are controlled and regulated by various pieces of litigations such as employment laws, occupation health and safety standards, consumer protection laws and environmental protection legislations.

Porter’s five forces analysis

In order for the lead management at Electrolux to possess a competitive advantage against other market rivals, the Porter’s five forces analysis is instrumental. The market industrial capability and market share of the company are quite favorable largely due to its wide product differentiation. The company has also devised a marketing strategy whereby it can both lower and increase prices while still maintaining profitability. However, other market players have introduced substitute home appliances that are threatening the profitability of Electrolux. Nonetheless, the company has intensified product renewals in order to be at par with the changing tastes and preferences of consumers. Besides, the incumbent firms are threatening the global market. As such, barriers to entry have been created in areas where other rivals are already dominating. Nevertheless, price reduction has been employed by Electrolux even in markets controlled by other competitors.

One of the key factors that will influence future strategies is the diversification of products that are manufactured by the company. The management of the company will have to increase its product line in some locations such as Europe and North America. Secondly, new distribution channels will have to be developed by the company in order to boost sales and marketing of the professional indoor products. Finally, the management at Electrolux can still leverage on the cost reduction measures in order to attract a higher market share than its competitors. However, low cost products should be distributed in appropriate markets that can fully absorb them.

Analyse possible alternative strategies relating to substantive growth, limited growth or retrenchment with reference to the range of strategic initiatives implemented by Electrolux between1967 and 2005.

In order to demonstrate how organizations may experience exponential growth, Igor Ansoff presented a model that could be used to explore and analyze various growth strategies in a firm. The two most important aspects in the matrix are both the current and future operating portfolio of a firm. These may include both the products and markets. The matrix is shown below:

From the above table, it can be observed that an organization may grow through diversification, product development, market development and market penetration. When a business entity experiences organic growth, it makes use of internal funds and capital plough back in order to expand the operations. In other terms, organic growth does not utilize resources obtained from strategic business alliances, mergers or acquisitions. Advantages of organic growth include realistic achievement of the strategic goals of an organization, absence of cultural conflict, relatively affordable when compared to acquisitions. However, organic growth may lack merit since it takes a long time for a business entity to experience significant growth, it is riskier since any business loss affects a single entity.

On the other hand, mergers and acquisitions have the following advantages:

• They offer additional synergy required for efficient and profitable production of goods and services.
• Efficiency in terms of the cost of production can be easily realized in the case of mergers and acquisitions.
• A competitive edge can be easily maintained in the presence of mergers of acquisitions largely due to combined resources.
• Improved business networking due to a combination of two or more businesses.
• The market power of an organization is boosted in the presence of mergers and acquisitions.

On the other hand, mergers, acquisitions and strategic alliances have the following disadvantages:

• Extreme diseconomies of scale may be experienced. This demerit also culminates into higher unit costs.
• Culture clash due to the unique type of business acquired or merged
• Some employees may be made redundant and eventually lead to loss of motivation at workplace.
• The different businesses that are combined may conflict in terms of objectives and thus disrupt the process of production.

In the case of Electrolux case study, about 60 acquisitions were concluded during the 1970s. Other acquisitions were also made in the 80s. As a result, the company ended up making huge sales and profits outside the host country (Sweden). These acquisitions hastened the expansion process of Electrolux compared to the early years of operation when it was running independently. However, the high number of acquisitions was not favorable to some extent. For instance, several subsidiaries of the company started under-performing. This led to high overhead costs and marginal profits. The management was later compelled to transfer production to cheap/affordable destinations.

Select an appropriate future strategy for Electrolux by analysing the range of strategic initiatives that will be pursued by Electrolux in the near future, using the criteria of suitability, acceptability and feasibility.

Suitability

One of the priorities of Electrolux is to launch new and suitable competitive products that will be able to compete favourably in the available marketing opportunities. In addition, the management of the company is keen in evaluating the most suitable approaches that can be used to expand market share of its products in the near future. These goals may not be achieved if suitable and appealing products are not rolled out in the market.

Acceptability

The on-going Research and Development at Electrolux is aimed at developing products that will be generally accepted by the targeted market. This explains why innovation is a core supportive activity at Electrolux since the tastes and preferences of consumers can only be met if the latter accept the available products. The company is also approaching acceptability in terms of the sustainability of its products, brand/design, and the quality of products and services.

Feasibility

This refers to the operational capability and excellence of both the current and future endeavours of the company. The feasibility of some sensitive projects such as relocating production units should be assessed with great care. The company is planning to shift some of its manufacturing plants to low-cost countries. This is aimed at reducing the cost of production by a significant margin. There are some production units that will be moved to Mexico from Greenville (United States). The management at Electrolux is quite convinced that the project is feasible.

Other closely related feasibility undertakings include cost reduction measures, rolling new products, and strengthening the company’s brand.

Explain strategic contexts and terminology (missions, visions, objectives, goals, core competencies)

Vision

This refers to a comprehensive, clear picture of a firm when projected at some position in future. A vision statement usually acts as a reminder to organisational stakeholders on where an organisation is anticipated to be in future. A vision is also a general guideline on the future prospects of an organisation. In order for an organisation to demonstrate improvement in terms of performance, it should be able to establish its current position and the anticipated future. A vision may be derived from personal hopes, beliefs and aspirations, real life experience, and philosophical values and ideologies derived from society. For example, IBM vision for 2013 reads “Drive Growth. Manage Risk. Optimise Performance”.⁵

Mission

The mission of an organisation refers to a particular program that has been put in place in order to execute some task or accomplish certain objectives. A mission also elucidates the main reason why a particular organisation was formed. In other words, it acts as the broad objective of an organization. Hence, a vision statement should contain a concise business strategy that aligns well with the stated vision. A mission should be in a position to highlight what an organisation does, how it is done and the targeted audience. For instance, the following is the mission statement for IBM:

“At IBM, we strive to lead in the invention, development and manufacture of the industry’s most advanced information technologies, including computer systems, software, storage systems and microelectronics. We translate these advanced technologies into value for our customers through our professional solutions, services and consulting businesses worldwide.” ⁶

Objectives and goals

Goals are the expected results before a given process can be accomplished. It implies that goals have a broader perspective. They are also general principles that are used to guide communal aspirations. On the other hand, objectives are fine goals or targets that are precise in nature. Goals cannot be achieved with objectives. They are also measurable in terms of the expected outcomes.

Core competences

Core competences in organisations are fundamental in the sense that they provide a firm with unique and outstanding potentials, abilities and strengths. Hence, core competences are similar to the ‘hedgehog’ of an organization. They are unique attributes that elevate an organization to admirable levels.

Strategic capability

Strategic capability entails both the resources needed for production and the core competences or the outstanding performance of an organisation. Hence, competitive advantage can be realised within an organisation when the right resources (raw materials and financial capital) are used in the most excellent manner. In order for strategic capability to produce desired and sustainable competitive advantages, the following criteria should apply:

• Non-substitutability
• Immutability
• Rarity
• Value

In the case of Electrolux company, strategic capability has been achieved through strategic acquisitions and core competences derived from innovation and customer satisfaction. It is also vital to mention that sustainable competitive advantages can only be built in a competitive environment where other market rivals are equally active.

Review the issues involved in the strategic planning

To begin with, strategic decisions entail the long term path that are usually taken by an organization. According to the Yahoo case study, Brad noted that in order for Yahoo to experience positive and significant change, it would indeed take a long time. In other words, long term decisions would be required to transform the operations of Yahoo. Secondly, the scope of the activities carried out by an organization depicts the complexity of strategic decisions to be made. In order for Yahoo to experience expedited growth, it would be necessary for the organization to spread out its various business operations.⁷ Finally, the values and expectations of the top level employees is a critical factor when making strategic decisions. For instance, managers can opt to drive major development agendas in organizations or even decide to limit their potentials depending on their individual values and expectations. Most of the top Yahoo managers may have pursued growth of the company in diverse directions without being accountable. This led to massive management failure among them.

Explain different planning techniques

The portfolio balance of a business entity can be validly conceived using the matrix known as the Boston Consulting Group (BCG). The two main criteria used by this matrix are market growth and market share. The latter can also be used to determine the level of attractiveness of a business portfolio. For example, ITC has been a market leader in the provision of consumer goods in the wider Indian market. Initially, it used to deal with cigarettes. As a tobacco company, it later stretched its products portfolio into the production of fragrances.

Compare the roles and responsibility for strategic implementation. Do this by explaining how the size and structure of an organisation will have an impact upon how new strategies will be implemented in that organisation.

The processes of implementing strategies and overall strategic development are usually undertaken by strategic consultants, middle-level managers, strategic planners, directors and top managers. Firstly, top managers play the overall supervisory role in an organisation. Several departmental managers can work under one top level manager. Directors largely play the role of offering both qualitative and empirical guidance on the daily operations of an organisation. Strategic planners are specifically charged with the duty of planning portfolios needed by an organisation. Their roles are restricted within certain domains or divisions of an organization. Middle managers coordinate the activities that are usually carried out by the lower level managers and top or senior managers. Finally, strategic consultants are usually engaged from time to time on matters regarding current and future needs of an organisation and especially in areas related to planning. For example, the top managers in the Yahoo case study were supposed to streamline the activities of the organisation in the most profitable manner. However, they failed to do so mainly due to lack of any consultancy from a strategic consultant. The strategic planner and directors were also supposed to be involved in the entire expansion process.⁸

Evaluate the resource requirements to implement a new strategy for an organisation

The core factors of production include land, capital, labor and entrepreneurship. Any process of production must be anchored on a solid piece of land. For instance, factories, infrastructure required for logistics, and human settlement require land. Secondly, capital is either the material or financial resources needed to start the process of production. Labor refers to all skilled and non-skilled human or machinery efforts needed in the production process. Finally, an entrepreneur refers to an individual who comes up with an idea that is instrumental in the production of goods and services.

Evaluate the resource requirement for the implementation of strategy developed by Michael O’leary to change Ryanair from a luxury to low cost airline

Some of the core resources required to convert Ryanair to a cheap airline from a costly one are the skills and competences drawn from entrepreneurship. At the moment, the airline has adequate resources that can be used to transform its standards of flight services. However, there is need for necessary expertise since converting it to a low cost airline will demand a lot of restructuring and subsequent marketing. For instance, barriers to entry are eminent because the airline will usher in its services as a new service provider in the low cost category while there are other players who are already well established within that domain.⁹

Discuss targets and timescales for achievement in an organization to monitor a given strategy

It is vital to begin by exploring the mission statement of an organisation. The time scales as well as the short term targets will be affected by the long term objectives of an organisation. In the case of short term objectives, it will be possible for an organisation to invigilate the progress within some departments and also quickly visualise how success can be achieved from the set short term objectives. When an organisation is keen in attaining the broader goal contained in the mission statement, it is advisable to break down the goals into smaller units so that they can be achieved progressively. This monitoring process is especially practical when dealing with customers who are relatively loyal and would like to see positive progress with the passage of time. A target can also be set so that the broken-down objectives can be achieved with much ease. For example, incentives can be used to motivate the key players who have been positioned to achieve the objectives within the set timelines.¹⁰

When the broad goals have been broken down into smaller manageable and achievable levels, it will make it a lot easy for managers to monitor the progress, analyse the goals achieved and also make follow up procedure on areas that have not been achieved as per the set timelines and objectives.

Bibliography

Blythe, J, & AS Zimmerman, Business-to-business marketing management: a global perspective, Thomson Learning, London, 2005.

Cooper, D, & IT Robertson, Recruitment and selection: A framework for success, Thomson Learning, London, 2001.

IBM Software Vision 2013, Drive Growth, Manage Risk, Optimize performance, Web.

IBM, About IBM, Web.

Jackson, S.E, & RS Schuler, “Understanding human resource management in the context of organizations and their environments”. Annual Reviews, vol. 46, no.3, 1995, pp. 237-264.

Johnson, G, K Scholes & R Whittington, Exploring Corporate Strategy, 8^th edn, Prentice Hall, New York, 2008.

McCann, P, Strategy & Business Planning of Privately Held Companies. Victoria, B.C, Trafford, 2000.

Morra, I. L. G., & RC Rist, The road to results: Designing and conducting effective development evaluations, World Bank, Washington DC, 2009.

Secord, H, Implementing best practices in human resources management, CCH Canadian, Toronto, 2003.

Footnotes

1. G Johnson, K Scholes & R Whittington, Exploring Corporate Strategy, 8^th and, Prentice-Hall, New York, 2008, pp.25-27.
2. SE Jackson & RS Schuler, “Understanding human resource management in the context of organizations and their environments”. Annual Reviews, vol. 46, no.3, 1995, pp. 237-264.
3. J Blythe & AS Zimmerman, Business-to-business marketing management: a global perspective, Thomson Learning, London, 2005, p.72.
4. Blythe, p.87.
5. IBM Software Vision 2013, Drive Growth, Manage Risk, Optimize performance, Web.
6. IBM, About IBM, Web.
7. H Secord, Implementing best practices in human resources management, CCH Canadian, Toronto, 2003, p.122.
8. ILG Morra & RC Rist, The road to results: Designing and conducting effective development evaluations, World Bank, Washington DC, 2009. P.84.
9. D Cooper & IT Robertson, Recruitment and selection: A framework for success, Thomson Learning, London, 2001, p.48.
10. P McCann, Strategy & Business Planning of Privately Held Companies. Victoria, B.C, Trafford, 2000, p.132.