Business Studies
Abstract
AB Electrolux is a company that deals with appliances and is found in Sweden. The company was first formed in 1919 and has been around despite going through significant government regulations and the rise of other companies. Despite going through rough times, the company has developed from being a domestic company into a global one. According to a report, the company has been able to sell more than 60 million of its products annually, from the year 2014 to more than 150 markets globally (Hollensen et al., 2018). Therefore, the company has been able to reach second place in the industry of appliances, right after whirlpool. The far that the company has come is all because of the business strategies that the company follows, which are both global and domestic. Additionally, the innovation strategies have been another reason why the company has been successful over the years because it has produced high-quality products at low cost to their consumers.
AB Electrolux has been in the business industry for so long that it has watched the rise of new companies that have posed competition to it. The organization has also witnessed the same companies rising and even falling away from the business industry. The success of AB Electrolux can be accounted for by the firm following the aggressive business strategies. Some of these strategies include producing high-quality products at a lower price for the consumers and having reliable partners within the industry (Hollensen et al., 2018). Therefore, it is possible to say that the firm can compete with local Chinese consumer manufacturers. Additionally, the AB Electrolux organization operates within three major segments. These segments include significant appliances, professional appliances, and small appliances. The major appliances have been divided into four geographical regions, while the other two operate universally (Hollensen et al., 2018). With such segments, the firm can compete with the manufactures from local Chinese consumers.
Companies evaluate leading perspectives since it is essential for their competences. There are three dominant views on strategy, which include institutional-based, resource-based, and industry-based. These perspectives help organizations to evaluate the effectiveness of their operations while in the global market. The evaluation is made possible since the views on strategy create an external and internal understanding of the worldwide market (Seo et al., 2016). With the understanding of knowledge, the organization intends to penetrate through the market, trusting that good international strategy is found within the three perspectives on policy. VRIO analysis by Barney has made it possible for the internal resources of companies to be functional analysis, whereby the firm’s high performance is attained.
The internal resources of Electrolux are among the three perspectives on strategy. The company produces low-cost products in comparison to its rivals, who are in the same industry. Concerning the industry-based view, the firm has implemented policy through the production and exportation of standardized appliances. The approach has helped Electrolux to cut across all its tasks in its worldwide market (Seo et al., 2016). Institutional based perspective on strategy determines how the behavior of a firm influence its role in the economy. For instance, the government’s rules and controls influence the performance of Electrolux, which, in turn, affects its function in the marketplace.
Following the VRIO analysis, the company accounts for its value, the status of its competitors, and the cost the company initiated. The strategy tripod of AB Electrolux influences the business by using the available resources (Seo et al., 2016). The way the company exploits the available resources determines whether it is failing or succeeding. AB Electrolux focuses on analyzing the China global market, which is its major competitor in the appliances industry. In consideration of the VRIO framework, the company can match up the competition that the local China manufacturers pose within the industry since it highly values its customers (Seo et al., 2016). The company provides consumers with better products at affordable prices without any delay.
Michael Porter explains the competitive benefits that a company can pursue within its chosen market. In the genetic strategies that Porter comes up with, an organization can bid its products at lower costs through cost leadership tactics (Lotayif, 2016). Competition in the market is tackled by winning customers in the market via having the least value price to value ratio. Therefore, cost leadership achieves high profitability by having a broader market for its products as well as via the cost reduction. Another generic strategy by Porter is the focus tactic. The plan involves an organization focusing on a specific consumer location, baseline of products, niche within the market, and its consumers (Lotayif, 2016). The focus strategy is most useful for small industries that focus on comprehending their confined market and clientele. Differentiation strategy is another Porter’s genetic strategy (Lotayif, 2016). The approach involves firms attempting to bid advanced and rare features for their services and products. Porter’s final generic strategy is the integrated cost leadership-differentiation tactic (Lotayif, 2016). The approach involves both methods of differentiating services and products and optimizing cost, combining the advantages that come with both ways.
After the evaluation of the generic strategies by Porter, the focus strategy would work best for Electrolux. The most substantial global shift in demography terms is the number of the middle class in Asia. Statistics suggest that in 15 years, the number of the middle class in Asia would triple the current number, resulting in more than 3 billion people globally. The focus strategy will come in handy for Electrolux since it will pay attention to the fast-emerging upper and middle-class markets that are emerging in China (De Toni et al., 2016). Additionally, the company has a target market of customer groups who have a preference for the superior products the company manufactures. A focus strategy would also work best for Electrolux because the firm has a distinct consumer lifestyle choice. The different customer lifestyle choice involves consumers who are eco-friendly and have a preference for multi-functionality and premium brand quality.
The corporate culture of Electrolux is the primary support of the firm demand in comprehending its consumers. The organization believes in the enthusiasm of the employees and the outstanding leaders who manage the company’s operations. The operations of Electrolux are carried globally; therefore, the company believes in the culture of high principles of service and moral standards (De Toni et al., 2016). There exist two attributes of culture within the AB Electrolux company. The first attribute is that it contributes to the competition that exists within the Chinese consumers. The second attribute of culture within the firm is that it competes with other companies that produce the same services and products globally. The initiation of learning in the organization has helped AB Electrolux improve products of high quality across Europe, Asia, and America. The cultural attributes have helped Electrolux to enhance the uniqueness of its products and the process of carrying out its operations (De Toni et al., 2016). The company’s corporate culture originates from the way the company performs all its operations from the early years. The existence of the culture has helped the firm to achieve the goals that it set; therefore, making it possible to spread to more than 150 countries all over the world.
In conclusion, Electrolux is a competence company, which is the second-best in the industry of appliances all around the world. The organization has aggressive business strategies that help it to survive in the competitive global appliances market. One of the bold approaches is the production of high-quality products at a lower price. That means that most people will prefer their products and services since they are offered at affordable prices and are of high quality. With such a strategy, AB Electrolux can compete with local Chinese consumer manufacturers. There are three leading perspectives on a plan which help organizations evaluate the effectiveness of their operations while in the global market. The internal resources are among the three aspects of strategy. Industry based view is another perspective, whereby, the firm implements procedure through the production and exportation of standardized appliances. The final perspective is the institutional-based, which determines how a firm’s behavior influences its role in the economy. The strategy tripod of AB Electrolux shapes the business by using the available resources.
Porter came up with four generic strategies that help companies to achieve their success. Cost leadership strategy is one that makes firms high profitability by having a broader market for its products as well as via cost reduction. Another approach is the focus strategy, which involves organizations focusing on a specific consumer location, baseline of products, niche within the market, and its consumers. The third one is the differentiation strategy that involves firms attempting to bid advanced and rare features for their services and products. The final approach is the integrated cost leadership-differentiation, which combines both methods of differentiating services and products and optimizing cost, utilizing the advantages that come with both ways. Focus strategy would work best for Electrolux because it will pay attention to the fast-emerging upper and middle-class markets that are happening in China, and because the firm has a distinct consumer lifestyle choice. The corporate culture of Electrolux is the primary support of the firm demand in comprehending its consumers. The two attributes of culture within the organization contribute to the competition in Chinese consumers and competition with other companies that produce the same services and products globally.
References
Hollensen, S., & Møller, E. (2018). Is “glocalization” still the golden way for Electrolux? Is there more to be done?. Thunderbird International Business Review, 60(4), 463-476.
Seo, B. G., Park, D. H., & Choi, D. (2016, August). Innovative service concept generation based on an integrated framework of design thinking and VRIO: the case of information supporting system for SMEs in Korea. In Proceedings of the 18th Annual International Conference on Electronic Commerce: e-Commerce in Smart connected World (pp. 1-5).
Lotayif, M. S. (2016). Selection factors of market segments and porter’s generic marketing strategies: Evidence from an emerging GCC market. International Journal of Business and Management, 11(1), 199.
De Toni, A. F., Battistella, C., & Ioan, L. (2016). Electrolux Case Study: Competing on Time. In International Operations Management (pp. 49-72). Routledge.