AB Electrolux's corporate strategy

AB The production of home appliances is the focus of the Swedish multinational corporation Electrolux. Its headquarters are in Stockholm, and it is the second-largest appliance manufacturer worldwide. The business was established in 1919 and sells a range of goods, including vacuum cleaners and large appliances. AB As a result of the amalgamation of Svenska Elektron AB and Lux AB, Electrolux was created. Professional products, small appliances, and large appliances are the three primary business divisions of the company. Freezers, refrigerators, stoves, and washing machines are some of the additional goods made by Electrolux. Additionally, Electrolux produces kitchen and laundry appliances.
Using the VRIO framework to assess Electrolux's capabilities
VRIO is a business analysis framework that constitutes part of a company’s strategic scheme. It is an initial for a four-question framework that deals with the capability to determine the competitive potential of a firm. The four questions include the question of value, the question of rarity, the question of imitability, and the question of organization. The capacity of Electrolux AB can neutralize any external threats with the resources available in the company. Moreover, the control of the company’s resources lies in the hands of all the stakeholders and not in a few individuals. It is not difficult for a company that will attempt to imitate Electrolux products, but the imitating company will face a significant cost disadvantage while trying to duplicate Electrolux’s resources. Electrolux is an organized firm that is able and ready to exploit its resources and to capture value. The organization has employed competent human resource managers who are experienced in leading the company to attain its intended value. The VRIO analysis framework will help in determining if Electrolux has a strong suit in parts where the company has limitations. The ability of Electrolux AB to lead its personnel and stakeholders effectively is a source of cost advantage as well as a source of differentiation for the company. Electrolux AB uses various programs to lead its workers and also to develop them as leaders, different from other corporations that rely on payment and trust in employee management. This capability permits the organization to make sound decisions on choosing its leaders to manage the company. The company’s capability guides its employees in exchanging ideas that will make them exploit the organization’s competencies. Electrolux has succeeded in the aspect of developing its leaders and managers (Barney, & Hesterly, 2010).

Analyzing the competencies of an organization using VRIO framework can always be done in a four-step procedure. First, the company should identify the costly, rare, and valuable resources to imitate. The two types of resources in a firm the tangible and the intangible resources. Tangible assets entail the physical things owned by the company such as machinery, buildings, and land. Tangible assets are not the source of competitive advantage since firms can readily purchase physical resources in the market. Conversely, intangible assets such as unique training system, intellectual property, trademarks, and brand reputation cannot be readily acquired and offer benefits of sustained competitive advantage. Therefore, to identify the costly, rare, and valuable resources to imitate, the organization should examine the company’s intangible assets. The second step is to find out if the firm is organized to exploit the available resources. This can be done the organization has an effective strategic management process. The third step is to protect the resources. When a resource that has all the four VRIO qualities is identified it should be protected using all means possible because it is the source that sustains the competitive advantage. The fourth step is for the company to review VRIO capabilities and resources (Barney, & Hesterly, 2010).

Electrolux has the capability of competing with the local Chinese consumer manufacturers. However, Electrolux failed to succeed initially due to its failed strategies. By presenting itself as a super brand in the market, Electrolux will become more competitive. The main reason why Electrolux will compete local Chinese companies is that shortly, the Asian consumer market for the home appliance is expected to double or triple. Currently, the company has invested heavily in on Research and Development to achieve innovations in the market. This strategy will place Electrolux in a better position in the market than the Chinese firms. Moreover, having a different target market will enable the organization to achieve a huge part of the market share (Electrolux, 2013).

Three Leading Perspectives on Strategy and how it Tripod influence Electrolux

The “Three Leading Perspectives on Strategy” is also known as the strategy tripod and was formed by Mike Peng. The three leading perspectives on strategy asserts that a company operating in a global market can be able to assess the effectiveness of its operations. The main goal of the tripod elements is to create both external and introspective understanding of the market in which the organization seeks to penetrate. The performance of a firm is affected by the strategy it implements which is determined by the institutional based view, industry-based view, and resource-based view.

According to an institutional based view, the different groups and institutions affect the shaping of behaviors and strategies in an organization as a result of their role in the economy. For instance, the state rules and regulations affect the operations carried out in Electrolux thus impacting on its performance directly. Institutions also create barriers if they fail to permit for a free market interrupting movement of products. These institutional barriers will significantly affect the performance of a company. On the other hand, the industry-based view is based on how a firm implements strategies that influence all its operations in an international market. This can be achieved through the exporting and production of appliances that are standardized. Therefore, the decisions made by a company is centralized at its head office. However, this strategy hinders the amount of innovativeness being offered at distinct markets when the organization operates internationally. On analysis of resource-based view strategy, a company implements the strategy in association with its internal resources for it to achieve high performance. Furthermore, strategic resources that can be implemented are usually competencies presented by differentiation and cost leadership. Electrolux has been using cost leadership effectively. The products produced by the firm is of low cost as compared to those of their competitors in the market.

Porter’s Four Generic Strategies and how they would work best for Electrolux

Porter’s Four Generic Strategies describes how an organization can pursue competitive advantage within its chosen market scope. The four generic strategies include differentiation strategies, cost leadership strategy, cost focus strategy, and differentiation focus strategy. The generic approaches can be applied to services or products in any industry and companies of all sizes. The generic strategies were introduced by Michael Porter in 1985. In cost leadership, a company chooses to become a low-cost producer in its industry. The cost advantage sources are varied and are determined by the structure of the industry. These sources may include preferential access to raw materials, proprietary technology, and the pursuit of economic of scale. A low cost producer should exploit every source of cost advantage. A company that can sustain and achieve overall cost leadership it will be an above-average performer in the industry. In the differentiation strategy, an organization tries to be unique in the industry along certain dimensions that are valued by buyers. This strategy selects certain attributes that several buyers in the industry perceive as important (Bordean, Borza, Nistor, & Mitra, 2010).

The generic strategy of focus is based on the choice of a narrow competitive scope in the industry. A group of segments in the industry are selected and strategized to the exclusion of others. The organization focuses mainly on a certain niche, geographical region, consumer, a line of product, and consumer base in the market. The initial part of implementing this strategy is for the organization to present services or products to a limited group of customers who are significant. This strategy is effective for smaller firms that are committed to their operations. Only companies that sacrifice parts of their assets or capability in a marketing endeavor will benefit from focus strategy. Moreover, the focus strategy can also be centered on differentiation or cost strategy. This strategy encompasses directing cost leadership or differentiation on a limited scope. The ideas are for the firm to be recognized in a certain market division (Griffin, 2015).

Finally, firms that incorporate several strategies instead of relying solely on the generic strategy can comprehend and adapt swiftly to novel technologies. Products manufactured through Cost Leadership-Differentiation Strategy are usually less unique compared to other strategies. However, this strategy combines the benefits of both methods.

To achieve and sustain competitive advantage, Electrolux should implement the focus strategy as a company. According to Ernst & Young (2013), the amount of the middle-class people in Asia forms the most substantial global shift regarding demography. A survey indicates that a decade from now the number of middle class in Asia will have grown to over 3 million people. Thus, the focus strategy will be suitable for Electrolux since it focuses on a fast-growing upper middle and middle-class markets in China. Furthermore, Electrolux has a target market of various consumer groups who have a preference for high-quality products. Another reason why the focus strategy will suit Electrolux is that the firm has a unique consumer lifestyle preference. This entails the customers who prefer premium brand quality products that are multifunctional as well as eco-friendly (Electrolux, 2013). The relative position of a company in the industry determines if the company’s profitability is below or above average in the industry. Two main types of competitive advantages that an organization can possess are differentiation or low cost. These two main types of competitive advantage linked to the various scope of activities in which an organization seeks to attain them, leading to the generic strategies for achieving an above average performance in the industry.

When Electrolux want to choose one of the four generic strategies it is important for the firm to take into consideration its strengths and competencies. A three-point step can be used in choosing a suitable generic strategy. The first step is that for every generic strategy the organization should conduct a SWOT Analysis of the threats and opportunities it may face, as well as the analysis of the weaknesses and strengths of the company if the strategy is adopted. After the analysis, it will be clear that the company will find some generic strategies to be of less value. The second step is the application of five forces analysis to comprehend the nature of the industry the business is operating in. The final step is to compare the SWOT Analyses of the suitable strategic options with the outcomes of the five forces analysis. The strategic option that should be chosen is one that will have various benefits. These benefits include how the option could be used to manage supplier power, manage customer power, compete with rivals, reduce the threat of substitution, and reduce the threat of new entry. Then, the generic strategy that presents the strongest sets of options should be selected an implemented immediately.

The Corporate Culture of Electrolux

Electrolux has an innovative corporate culture, and one of the unique qualities of Electrolux’s corporate culture is diversity. In Electrolux innovation is necessary and highly valued for the success of the company. Through the culture of innovation, the firm mainly focuses on developing new ideas and making sure those ideas are implemented. In an innovative culture, a diverse set of personalities helps the ideas to succeed more readily. This is because certain individuals are better than others in innovation, while others are good in implementing those new ideas. The corporate culture of Electrolux is constituted by people who come from diverse backgrounds and form a team that is responsible for producing high-quality products. Moreover, diversity enables employees to achieve the set performance parameters, resolve disputes, and develop and grow in their daily routine. The firm also relies on diversity to compete effectively in the global market (Electrolux, 2015).

Leadership development is also a quality of the Electrolux corporate culture. According to Electrolux (2015), leadership development can be termed to be a progression that emphasizes promoting the overall corporate outcomes of the company. This can be achieved by accelerated development of the management competencies. Electrolux has three main levels of leadership management. The leadership program in Electrolux is the initial step of the firm’s leadership programs. The program is meant for managers who have little experience in managing people. It was introduced on the perception that leadership is more of schooling and exchanging ideas than showing supremacy and designating responsibilities. Another leadership program in the company is the New Next Level Leader program that was meant for experienced leaders who are responsible for implementing strategies. The goal of this program is to create a way of implementing leadership competencies that are needed in executing the strategy of the group in a precise manner. The program emphasizes more on strategy implementation, and it was founded on the current leadership abilities. The final level of management is the executive who was formed as a passage of education of top leaders and senior managers in preparing them to lead and manage impending and current modifications in the organization. This management level also complements the worldwide program of the company (Electrolux, 2015). Innovative culture has several benefits in the organization. Innovation is an aspect of organizational culture that will always change in any industry. Companies that do not keep up with new changes usually face the risk of being left behind. Electrolux of want to learn about the greatest new practices so that the company can align its strategies appropriately. The organization has realized that best practices become norm within a short time.

Conclusion

Electrolux has the capability of competing with the local Chinese consumer manufacturers. The main reason why Electrolux will compete local Chinese companies is that shortly, the Asian consumer market for the home appliance is expected to double or triple. Electrolux has been using cost leadership effectively. The products produced by the firm is of low cost as compared to those of their competitors in the market. To achieve and sustain competitive advantage, Electrolux should implement the focus strategy as a company. Electrolux has an innovative corporate culture, and one of the unique qualities of Electrolux’s corporate culture is diversity. Innovative culture has several benefits in the organization.



References

Barney, J. B., & Hesterly, W. S. (2010). VRIO framework. Strategic management and competitive advantage, 68-86.

Bordean, O. N., Borza, A. I., Nistor, R. L., & Mitra, C. S. (2010). The use of Michael Porter's generic strategies in the Romanian hotel industry. International Journal of Trade, Economics and Finance, 1(2), 173.

Electrolux. (2013). Electrolux 2013 Annual Report. Retrieved from http://group.electrolux.com/en/company-overview-271/

Electrolux. (2015). Our employees and diversity. Retrieved 31 December 2015 from:http://www.electroluxgroup.com/en/our-employees-and-diversity-2791/

Ernst & Young. (2013). Hitting the sweet spot. Retrieved from http://www.ey.com/GL/en/Issues/Driving-growth/Middle-class-growth-in-emerging-markets

Peng, M. W., Sun, S. L., Pinkham, B., & Chen, H. (2009). The institution-based view as a third leg for a strategy tripod. The Academy of Management Perspectives, 23(3), 63-81.