International Business and Global Strategy: of Electrolux - Case Study Example

International Business and Global Strategy Contents Part A 3 Company Background 3 Company’s mission statement 3 Company’s business-level and corporate-level strategy 4 Business Level Strategy 4 Corporate Level Strategy 4 Company’s product profile 5 Company’s financial analysis 5 Profiling of major competitors both domestic and international 6 Part B 6 In-depth Market Analysis of United Arab Emirates 6 Target market potential 6 Company sales potential 7 Analysis of local competition 8 Regulatory Environment for the industry 8 FI regulations and implications for the company 9 Entry Strategy desired 9 References 11 Part A Company Background Founded by Alex Wenner-Gren 91 years ago Electrolux has come to be known as the world leader in the category of production and sales of household and commercial appliances. The company is stated to earn a record of selling around 40 million electronic products in and around 150 countries round the world. Electrolux gains the position of the world leader through the process of continuous innovation rendered in the products and processes of production. The activity of spontaneous innovation is practiced in the company however keeping an eye on changing consumer needs. Electrolux group operates based on popular brands like Electrolux, Eureka, AEG and Frigidaire. A current estimate released in 2010 reflects that the group recorded total sales of electronic products amounting to 106 billion in Swedish currency and a total number of human resources of 52,000 people (Electrolux, 2011). Company’s mission statement The mission of Electrolux as a company working on innovation and consumer needs is to help make life easier, enjoyable and innovative through the production of specialised products dedicated to such ends. The company in regards to its internal environment focuses on rendering respect and honour to the issues pertaining to workplace diversity and also in making the work environment bind on ethical regulations. Integrity being rated high on the company’s mission and value statement the company also works in creating a safer and sustainable work environment for its people. The above aspects help in enhancing the motivation of the people to work more productively in the innovative and empowered work atmosphere. Electrolux in addition to the above aspects also works in rendering both financial and infrastructural help to the larger social communities both regional and international and also in regards to helping the employees for their financial and other needs (Electrolux-a, n.d.). Company’s business-level and corporate-level strategy Business Level Strategy Speaking on Electrolux’s strategy at the business or tactical level it is worth mentioning that the company conducts a large amount of market research along different global regions to understand the changes in the level of consumer needs. This practice helps the company in designing its products accordingly to help meet local, regional and international consumer tastes. Again the company working on the aspect of innovation also focuses in keeping the cost of manufacturing of the products low to help gain competitive advantage. Thus the business strategy focuses on production of around 55 percent of its different products in such regions of the world having large availability of resources thus helping in keeping the costs of manufacturing low. Corporate Level Strategy The Corporate Level strategy of the company renders a bird’s eye view to the strategic activities carried out by the company in the tactical level. The management body of the company works to render salient characteristics to the product mix of the company by enhancing the parameters of innovation thus helping the consumers save on energy consumption. Innovative designs are rendered to the products by the company to help carve out a premium brand amidst the other international electronic brands in the global marketplace. Strategies like acquiring and consolidating other small electronic companies in different regions also helped the company gain on its innovation and resource potential. It transformed its image from a manufacturing firm to a high innovation and consumer centric firm (Electrolux-b, 2011). Company’s product profile The product portfolio of Electrolux ranges from electronic appliances made for kitchen use, to that of other appliances manufactured for home laundry purposes. The product portfolio of the company also embraces other accessory products made for domestic and professional use. Kitchen appliances produced by Electrolux contain different types of ovens, refrigerators, dish washing appliances and other storage utilities and also ventilators made of innovative technologies and well set designs (Electrolux-c, n.d.). Again the laundry products of the company contain of both washers, dryers, different set of drawers and also an innovative laundry environment for restoring a quieter environment (Electrolux-d, n.d.). Company’s financial analysis The financial analysis of the company conducted based on the 2011 period reflects that the return on net assets for the category of small appliances that rode to 50 percent during 2010 dipped to around 30 percent during 2011. It was held that acquisition activities had affected the group performance during 2011 countering the downfall. The net sales for the company during the same period amounted to 28, 369 million SEK amounting to around 0.77 SEK earning on a per share basis. Operating Income and Margin for Electrolux during the same period amounted to around 1441 million SEK and around 5.1 percent. The net sales figure of 2011 reflected a rise by around 1.9 percent from the previous period. Owing to the positive financial performance of the company during the 2011 period the board of directors of Electrolux happened to declare a dividend on a per share basis of 6.50 SEK. Furthermore the financial performance of the company became highlighted owing to a reduction in the amount of working capital made during that period. Thus the financial year of 2011 reflects a positive year for the Electrolux Company (Electrolux-e, 2012). Profiling of major competitors both domestic and international In the international market the major competitors of Electrolux constitute companies like Whirlpool, Maytag and Haier all competing largely to gain a larger share in the white goods market. Other competitors in the European market constitute companies like Bosch-Siemens, General Electric, Samsung, Fisher and Paykel and Philips. As in relation to the international market the European market for white goods also constitute salient competitors like Indesit, Whirlpool, Dyson and Miele. These companies are also working on innovation and newer designs to gain the attractions of the large number of sophisticated consumers both along the European and international markets and thus resulting in increased competition for Electrolux. In regards to the professional products Electrolux competes with regional competitors like Rational and Manitowoc in markets like Italy and France respectively (Electrolux-f, 2011). Part B In-depth Market Analysis of United Arab Emirates Target market potential The target market potential for consumer and professional electronic products in United Arab Emirates is quite high with a rising demand in regards to commodities like television, refrigerators, sound systems, kitchen and other home appliances. With the rise in the number of trade fairs and exhibitions in the United Arab region helping a number of domestic and international electronic product manufacturers showcase their products the demand for such has raised by around 50 percent from the previous position. Again with the rise in the number of retail outlets the region also craves for the international range of products manufactured in countries like Japan and China. Thus the target market for electronic products in United Arab Emirates constitutes both professional and domestic entities along with the younger people opting for stylish and fashionable products to meet their growing needs. With the rise in the Gross Domestic and Per Capita Income level in the United Arab region it is gradually turning into a hub for reflecting growing demand for electronic products (US-Arab Tradeline, 2007, p.22). Company sales potential The sales potential for Electrolux in the United Arabian markets mainly centres on the commercial appliances market. United Arab Emirates reflects a growing trend of rise in hospitality sector with large number of three and five star hotels coming up in different regions. It is found that many reputed hotels and restaurants operating in the region of United Arab Emirates and along the Middle East nations are resorting to the purchase of kitchen and food service appliances from Electrolux. The installation of such appliances in hotels like Park Hyatt and Royal Mirage in the region has raised the demand for such products by the hospitality sector in United Arab Emirates. Thus it is found that sales of the electronic appliances gains momentum in regards to kitchen products for Electrolux in United Arab Emirates (Electrolux-g, n.d.). Analysis of local competition The major competitor for Electrolux in the United Arab Emirates in regards to the electronic appliances market is the Consumer Electronics Association. The association body hosting a large number of electronic firms under its banner thrives as the regional leader in the market for white goods in the region owing to support from developed nations like United States. This association is held to record annual sales amounting to around $140 billion during the financial period of 2007. This body gains such immense potential owing to the gaining of potential strength of retail, wholesale and strong supply chain networks which makes the companies under it able to produce effective electronic appliances (US-Arab Tradeline, 2007, p.22). Regulatory Environment for the industry The regulatory environment of the United Arab Emirates market pertaining to the manufacture and sale of electronic goods has in fact standardised the production of several electronic appliances both in regards to the consumer and commercial sector. Thus the regulatory and standardization body based in the region governs the production of electronic items like refrigerators, microwave ovens, washing machines, air conditioners and chillers, water heaters and the like. Moreover in the current scenario it is found that such regulations and standardizations also is extended by the regulatory authority of United Arab Emirates to include products that would fall in the category of cooking appliances. Thus manufacturers producing such items are required to abide by the regulations brought about by the body from time to time focusing on safeguarding the lives of consumers from the emergence of potential hazards. Hallmarks and standards are required to be printed on the electronic products before being despatched to the retail and wholesale market for sales (Albawaba, 2011). FI regulations and implications for the company The economy in Saudi Arabia reflects an open market helping many major economies like Japan, China, United States and also South Korea to enhance their trade relations with the region. Henceforth the mentioned economies both encourage wide scale exporting and importing activities to be continued in regards to the Saudi Arabian market and thus mutually tend to gain over such. The region gaining high on its gross per capita income level encourage many major companies in such countries to open up their branches in the Saudi Arabian market. Moreover the foreign investment regulations in the country have been made a little flexible letting the foreign companies gain a more potential soil in the Saudi Arabian market. During 2003 it is recorded that United Arab Emirates had gained around $300 million from United States as foreign aid. The country which was once considered non receptive to foreign company entry owing to huge amount of government interference now encourages such entry of foreign firms through denationalizing many of its companies. However it is found that the foreign firms suffer from a major disadvantage in needing to pay taxes of around 20 percent of its trade and commercial activities where the Saudi Arabian companies pay only 2.5 percent and also fail to be traded effectively in the stock exchange. Henceforth, Electrolux would face formidable amount of competition from key players belonging to the United States and Japanese and Chinese market and also would face similar constraints in regards to payment of taxes and trading in the regional stock exchanges (Library of Congress-Federal Research Division, 2006, p.16). Entry Strategy desired Electrolux focused to enter the Saudi Arabian market through the gaining of entry in the commercial food sector by the manufacturing and sale of kitchen appliances and other home laundry products. Thus several firms operating in the hospitality sector ranging from restaurants to hotels have already started using the products manufactured by the firm. The entry strategy to the Saudi Arabian market can be revised by the company through the use of internet marketing activities that would help the company gain a larger consumer sphere in the foreign market. The internet marketing activity should focus on the display of different products through the web pages and also can create a two or three dimensional store outlook to let the consumers have a feel of the upcoming stores in the region. References Electrolux, 2011. About Electrolux. [online]. Available from: http://group.electrolux.com/en/about-electrolux-492/. [Accessed March 17, 2012]. Electrolux-a, No date. Electrolux Supporting Our Community. [online]. Available from: http://www.electrolux.com.au/Global-pages/Page-Footer-Menu/Top/Electrolux-Charity/Electrolux-Charity-2/. [Accessed March 17, 2012]. Electrolux-b, 2011. Strategy.[online]. Available from: http://group.electrolux.com/en/strategy-502/. [Accessed March 17, 2012]. Electrolux-c, No date. Kitchen Appliances. [online]. Available from: http://www.electroluxappliances.com/kitchen-appliances. [Accessed March 17, 2012]. Electrolux-d, No date. Laundry Appliances. [online]. Available from: http://www.electroluxappliances.com/laundry-appliances. [Accessed March 17, 2012]. Electrolux-e, 2012. Consolidated Results 2011. [online]. Available from: http://group.electrolux.com/en/consolidated-results-2011-12760/. [Accessed March 17, 2012]. Electrolux-f, 2011. Business Areas and Competitors. [online]. Available from: http://group.electrolux.com/en/business-areas-and-competitors-249/. [Accessed March 17, 2012]. US-Arab Tradeline, 2007. UAE Emerges As Top U.S. Export Marketin the Middle East. [pdf]. Available from: http://www.nusacc.org/assets/library/22_trdln0607uae.pdf. [Accessed March 17, 2012]. Electrolux, No date. Archive 2012 - 2011 – 2010. [online]. Available from: http://professional.electroluxusa.com/index.asp?o=n&c=a&a=2008&n=3346. [Accessed March 17, 2012]. Albawaba, 2011. UAE approves regulation to control gas powered cooking appliances. [online]. Available from: http://www.albawaba.com/uae-approves-regulation-control-gas-powered-cooking-appliances. [Accessed March 17, 2012]. Library of Congress-Federal Research Division, 2006. Country Profile: Saudi Arabia. [pdf]. Available from: http://lcweb2.loc.gov/frd/cs/profiles/Saudi_Arabia.pdf. [Accessed March 17, 2012]. Read More