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Electrolux is a large Swedish multinational corporate that is specialized in household appliances and white goods. It had several big markets in Europe, North America and Asia/the Pacific as well as entering markets like China, Russia and the Latin Americas. The brand operates under their own name as Masterbrand as well as several other brand names which they have taken over in the course of existence. These brands include Frigidaire, Husqvarna, AEG, Molti and so forth. In 2007 it sold 50% of their goods under the name of Electrolux and made a steady profit of 4%, even though the material costs were rising.

The strategy of Electrolux is that it tries to create their products in such a way that consumers think; Wow, they really thought of me when they designed this product, but I never knew I needed that product in the first place. This means that they are really into looking in depth to the consumers needs and then designing products.

Strategy

Strategic decisions have several attributes in common. They are always about the future, affect operating procedures, demand an integrated approach, sustains relations and networks in and outside the company, change organisations and complex in nature. Examples are for instance the Talent Management strategy Elextrolux employs. The company recruits talent from the ground up by offering placements, and fills 80% of their positions that open up from inside the company. This influences strategy by changing operations, is integrated, since it affects multiple departments, sustains networks by maintaining a pool of talent inside as well as outside Electrolux and is a complex approach. Other examples are the innovation policy, cost cutting that goes on in the company and the following of trends.

Levels of Strategy

Inside an organisation there are several levels at which strategies are conceptualised. Although scholars in the field of strategy have identified additional strategic levels, the three main levels at which strategies are mapped out inside an organisation are corporate-level strategies, business-level strategies and operational-level strategies.

In principle the strategies designed at the corporate level determine the overall and organisation-wide purpose and scope of the company and have significant impact on the Units lying underneath. The Business-level strategies concern the successful competition on the specific and distinct market of one of the organisation’s strategic business units. Both corporate-level and business-level strategies need to be adopted when formulating strategies about allocation and use of resources, processes or people on the operational level.

At Electrolux the corporate strategies are formulated by the president and CEO Stråberg and the ‘Strategy and Key Process Group’. They provide guidelines concerning Cost and Performance, Consumer Insights, Brand Management, Product Development, Talent Management, Social Responsibility, Organizational Structure and Business Sector Cooperation. These Guidelines affect the Business units underneath directly and will, if realized successfully, improve image, culture and knowledge of the business sectors and different brands.

The business level at Electrolux is represented by the boards of the different business sectors. These are divided into white goods, floor products and small appliances, outdoor consumer durables and professional durables, subdivided into indoor and outdoor products. Due to the size of the white goods sector, it was divided geographically into Europe, North America and rest of the world. These seven business units have complete responsibility for their financial results and balance sheets and will develop an individual strategy according to their specific market needs and their competitive position. This business unit strategy in turn affects the allocation of resources and the process design on the operational level of the brands as for example production or sales strategy, supply chain management or cost reduction.

Strategic Positions

An organization’s strategic position is affected by three main factors: the expectations on the organization’s purposes mainly influenced by culture and the most important stakeholders, the organization’s strategic capabilities in terms of resources and competencies, and the environment surrounding the organization. The environment includes six main fields of interest, referred to as ‘PESTEL’, which stands for political, economic, social, technological, environmental (ecological) and legal isues. Out of these we identified social and ecological issues to represent environmental opportunities for Electrolux, while future EU interference or unstable factory sites outside the core markets to be possible economic or political threats.

Electrolux’ major strengths can be seen in their market position, their relatively strong brands and innovative, competitive products. On the other hand there are uncompetitive products within the organization as well, which are weakening the organization’s position.

The stakeholders with highest influence on Electrolux strategic decisions are most likely to be the shareholders expecting high profitability through consistent cost reduction throughout the organization. Another important stakeholder is the Greenpeace organization as being one of the public opinion leaders for ecological issues.

Strategic Choice

The identification and understanding of options and choices the organization has on both, corporate level and business unit level, is vital for the planning of future strategies. These strategies can have different forms and characteristics in terms of the strategic development direction and the development method.

A few examples of possible areas of strategic choice could be to widen the organization’s brand portfolio. Electrolux could consider investment in entertainment electronics brands, as the supplier networks and competences are available already. It is questionable though, whether such products would fit the corporate focus on household and garden work products. A different direction could be the production of small size boats, which could make use of the existent raw material structures as well and be brought in line with Husqvarna motor-driven products.

Further issues of direction-change could be abandoning outdoor consumer durables from the portfolio as it is not a large-size field of business.

Investments in new and cheaper production sites would fit in line with the external development strategy of Electrolux and would reduce manufacturing costs, but would probably also affect the corporate image of producing high quality products.

Success or failure

When a company’s strategy is put into action, it has to be ensured that the theoretical ideas work out in practice. This depends to a certain degree on three key success factors which can be determined as structuring the organisation, aggregating the resources and managing change in strategy.

Structuring the organisation in general can be described as the giving the company a structure which finally results in the organisation chart showing the different hierarchy levels. Moreover this concerns as well a clear definition of processes and a steady maintenance of relationships to ensure a working cooperation between the different sections of the company. Electrolux has chosen a multidivisional structure. The organisation chart shows a division into a corporate level with CEO and special working group address strategic issues and increase the cooperation between the business sector units. Within this level the company identified six core processes such as purchasing, people, branding, product development, demand flow and business support applicable for the entire group. Furthermore the business strategies are dealt with in the business sector units divided into consumer, products and finally into geographical areas. These business sector units are supported by so called group staff units with headquarter functions covering financial, legal, organisation development and public relation activities.

The success of the strategy depends furthermore on a successful way of aggregating the company’s resources such as people, information, finance and technology. In order to optimize the use of resources, Electrolux puts a lot of effort into building a increasingly stronger talent base to benefit from their knowledge and expertise in order to keep the brand strong.

Moreover managing strategy often involves change since the strategy itself depends on the organisational context which concerns the complexity of business, the organisational structure, the competitive strategy and the aggregation of resources. The company Electrolux has already admitted change in strategy since they have decided for restructuring to improve the under-performers in the American market, did some cost cutting measurements to increase profitability or rationalised the product variants to strengthen the position in the European market.

Multinational Electrolux

A multinational company is characterised by its complexity. Therefore the corner pillars to succeed are keeping control at a corporate level, maintaining relationships between businesses and the corporate parent and last but not least the coordination of operations. In order to keep control at a corporate level, Electrolux group strategy is mapped out by the special working group which addresses strategic issues as well regarding the key processes. Business strategy decisions are made on business level since the different divisions know their markets best and are able to translate the group strategy into the suitable strategy for their markets. The multinational aspect can also be recognized in the choice to produce in different countries worldwide which implements a multinational supply chain and operations management, too.