Electrolux Brand Market Analysis - Essay Example

?Table of Contents 0 INTRODUCTION TO BUSINESS OPPORTUNITY ANALYIS 1 Potential Market Size 2 Underlying Advantages 3 Risks 2.0 COMPETITIVE ANALYSIS 2.1 Structure of Competition 2.2 Status and Strategy of Indian Market Competitors 3.0 STRATEGIC ANALYSIS 3.1 Core Competency 3.2 Source of Competitive Advantage 3.3 International Strategy of the Company 3.4 Mode of Entry 4.0 CONCLUSION 5.0 REFERENCES 1.0 INTRODUCTION TO BUSINESS OPPORTUNITY ANALYIS Electrolux Company had its initial launch as Electromekaniska AB in 1910. It was renamed Electrolux in 1919. It became a holding company for other entities in the group in 1928. Currently it is an independent company and has been able to attract and retain the loyalty of a vast number of International customers and build up a market for its White Goods Products. Electrolux is an established brand of the Company, and a mature product in its portfolio. It has gained critical acclaim for meeting most of the customers’ functional needs. Electrolux Tumble Dryer is a product of an American firm and it is sought to be marketed in India through Electrolux label as its product. The game plan is to capture the Indian market for this line of products through a well conceived Disruptive Marketing Strategy. A comparative study of all existing players in the field and observation of emerging trends with potential to impact the market in the coming few years forms the bedrock of this strategy. Thus this Document will be a crucial turning point in the Business History of the Company. The Document examines the position of Electrolux Brand in the context of the Indian Market. It also looks at the Tumble dryer for its strengths and weaknesses and their potential impact on the Indian customer preference. A study of the Market Plan reveals that the merits possessed by Electrolux Tumbler Dryers closely match the needs of a large number of Target markets. The Plan sets targets for Electrolux to penetrate the Indian Market and the ways to do so. This Document identifies some of the major points essential for making an objective analysis of the Indian Market scene with regard to the introduction of this American product. 1.1 Potential Market Size There is an assumption that the developed market of India, with its existing structural setting will control the market position for Tumble dryers. The market is composed of Manufactures from abroad producing in India, Importers, Whole sale traders and retailers. Many of the Foreign Manufacturers are also their own importers. The Wholesale traders generally have composite inventory consisting of several competing products or other allied goods of the same manufacturers. Retail trade also works on the same lines, (Koch, 2001). Some Retailers have significant presence in the retail market. Tumble Dryers are not seen sold in dependent retail shops in India because this product is not yet popular in the society. But survey shows they are willing to prepare and be ready for special orders. Independent shop owners account for about 80% of the Indian Retail Market and the remaining 20% is shared by several different channels. A review of the market in India shows that no proper distribution network is present for Tumble dryers. The potential customers are not even well informed of the existence of the product and its unique advantages. Available purchase points also do not seem to be educating the potential buyers about the product, (Huang, & Sternquist, 2007). Retail Stores in India are very few in number and the Managers do not have any effective stay in the choice of products that make up their stock in trade. International; products are not marketed in this kind of set up. They are sold through Retail Chains where centralized decision making ensures that the shops are invariably supplied the product in adequate quantity, depending on sales. Therefore introduction of Electrolux Tumbler Dryer to the Indian market may appear to be starting with a disadvantage. Another problem is that the product requires its own, dedicated Gas supply channel. This feature can be converted into an advantage if the installers are encouraged to exploit the opportunity for making more sales. One more factor likely to have an impact on the Product’s launch is the selling and installation network. There is the challenge of building up the Gas distribution and equipment installation network and the uncertainty arising from it, since no market actor is at present involved in it, (Feldhusen, Schmidt, & Strauch, 2006). 1.2 Underlying Advantages Electrolux’s market shares in other markets outside India had been impacted by the tactics of under-pricing or offering better products by competing International players. The company feels it is time it did a counter attack in the markets where the competitors are dominant at present, (Osland, Taylor, & Zou, 2001). A case in point is India. Some of the other observations prompting this India focused mission are as follows: • The Company has found out that there are some markets beyond the Home Turf where there is scope for more profits. • It has also realized that its customer base has to grow in order to benefit from economy of scale. • Diversification of Market is desirable from the point of view of distribution of risks and balancing against contingencies, (Sethi, 1971). • Home Customers going abroad are increasingly demanding service facilities where they go. 1.3 Risks In deciding to go abroad, the Company has to factor in the following aspects: • The Company, being new to the Market any not have a proper idea of the Customers’ preferences in the new market and may end up providing a product that does not match those preferences, (Mitchell, Smith, Seawright, & Morse, 2000). • The Business environment and Culture in the new country may be totally new to the Company and may place it in a disadvantage, (Ozlati & Abrami, 2004) • Lack of Managers with International exposure and expertise may be another concern • The Regulatory frame work or Political set up in that country may suddenly change and put the company in a handicap. 2.0 COMPETITIVE ANALYSIS 2.1 Structure of Competition The paper takes a look at the business culture of the Market for the Tumble dryer as a product. It also attempts to understand the status quo at the market including the institutions at work. The paper employs the Porter’s Theory to delineate the elements involved: • Competition for any product in a market is dependent on the number of Companies present in the market dealing with the same line of product, their market impact and strategies for their product and the extent of product differentiation present. • Government policies disfavoring outsider companies and encouraging local companies may impact the viability of the product and the company’s operations. • Prospects for new market opportunities for providing alternative products, (Calof & Beamish 1995) • Availability of alternative option and cultural preference favorable or unfavorable to specific products may impact competitiveness. • Customer Influence favoring local manufacturing and supply of the products by those earlier functioning as Installers. • The number of companies producing a particular product has an influence on competitiveness. Lesser number of producers, with combined output less than demand, will mean chances of higher prices ruling. Lower prices of Electrolux Tumble Dryers favor the introduction of the product in one market, as per one study, (Ekeledo, & Sivakumar, 1998). 2.2 Status and Strategy of Indian Market Competitors Market for Tumble Dryers is still in its infancy in India. As against the estimated total demand for 2.4 Million units for Washing machines, hardly 5 % of the demand is being met by the three existing international; players, viz, Haier, Whirlpool and L.G. Industrial users are absorbing about 180 units a year made available locally. So it is clear that there is a huge demand backlog. That also means it is an opportune time for Electrolux to enter the Indian market with a fairly priced product, gain a substantial lead in market penetration and sustain it with a steady rate of growth thereafter. Any plans on the above lines need to keep in mind the existing market relationship between the Retailers, Wholesalers and Manufacturers of local products, (Yin, 1994). The Chain Retailers also need to be brought in eventually. They will continue to exist and grow. Marketing plans that factor the retail traders and Chains into the picture will eventually succeed in bringing them into the network of Electrolux for sale of Tumble Dryers. That tempo should be built upon to gain National level presence in India and corresponding market share. As of now none of the Retail chains sells Tumble Dryers to the customers. But they can accept orders on special requests and place the demand on the company. They have a point that they may not be able to sell, deliver and install the Tumble dryers at the same cost as the Local Manufacturers do. Strategies to compensate the chain stores for the extra expenditure on Installation will have to be devised, (Saunders, & Thornhill, 2003). These could include faster turn over through promotional efforts or some other form. Customer preferences not favoring the way they use Washing Machines and loyalty to existing brands are to be kept in view also. Earlier Market assessments had indicated these trends. The Gas based technology of the Tumble Dryers poses a problem for the local artisans who are presently installing other manufacturers’ white goods products. Since their income depends on volume and technology is different, there is less likelihood of the existing installers opting for the Tumble dryers. They will therefore not be the ideal route for promotion and sale of the Gas also. Customers are unfamiliar with the product and its different technology. This is adding to the other problems faced by Electrolux in their push towards promoting the product in India. However, there are no legal barriers to the entry of the product as such, but the entry is bound to be not easy. The small number of local manufacturers who among them hold the bulk share of the white Goods Market is a factor to be kept in mind. 3.0 STRATEGIC ANALYSIS 3.1 Core Competency Electrolux is a Global player in the field of household appliances as well as for professional use , and having its presence in over 150 markets around the World., and selling a staggering 40 million products overall. The Company’s focus is on innovative products aimed at the convenience of the customer and backed by appropriate Research. Leading brands of the Company are Washing Machines, Refrigerators, Vacuum cleaners Cookers and Dish washers, under the names Electrolux, AegElectrolux. Eureka and Frigidaire. Electrolux group employed 57000 personnel and had a turn over of SEK 105 Billion in the year 2007. Electrolux enjoys the advantage of being the leading producer of front loaded Washing machines and Dryers The Company’s image as a producer of energy and water saving machines is an important factor as a selling feature and benefit. The continuous innovation record of the company, making machines easier to operate and the process of washing simpler to execute gives it a better customer perception of quality. Its ability to provide complete packages integrating Washing and other work machines as per customer preference, in Bathroom, Kitchen or a separate Wash Room is another customer friendly service. 3.2 Source of Competitive Advantage The market for Household appliances, as a whole grows at the rate of three to five percent in every business cycle, This broadly reflects the rate of growth of the global economy. But there are segments of the industry that grow at a faster pace ,on account of strong market forces and the entry of newer products , or location specific factors. Such growths are a distinct advantage for Electrolux, since it is one of the beneficiaries of the growth. • Higher penetration and faster replacement rate Higher degree of Market penetration and faster replacement rate of products in Electrolux’s portfolio place the company in comparative advantage vis-a-vis its competitors. This has been happening despite the continuous innovation in product quality by the company, (Beamish, & Banks, 1987). • Growth in new product categories The Electrolux group of companies has been oriented towards customer focused product development. Premium level customers who have clear choices and are willing to pay for the products that meet the choices are being provided with newer products on a continuous basis. It helps the company to grow its profits. • Expansion in growth regions Electrolux is continuously watching the faster growing product range in the well developed markets and at the same spotting specific areas of demand in growing economies, in order to introduce appropriate products and maximize profit. Its presence in large parts of Asia is a part of this strategy. Emerging markets are witnessing a rise in disposable income and a corresponding increase in demand for modern gadgets, (Mitra, & Golder, 2002). • Higher sales through kitchen specialists and the Internet A major portion of the Company’s growth in Europe and Australia is attributable to Kitchen Specialists. Electrolux can augment its sales by making use of these channels to sell its products. At the same time, Electrolux has been able to maintain a strong presence of itself via the internet and it has been working on this aspect through continuous efforts. 3.3 International Strategy of the Company In a bid to increase sustainable competitiveness, the Company has been relocating its manufacturing facilities to countries where labor and material are cheaper but of high quality or outsourcing the production to such places and purchasing from them, (Zikmund, 2000). Smarter purchasing and increase in purchases from favorable locations has been the group’s strategy. Material cost accounts for the largest cost component for the group. With a vast Supply chain of more than four thousand suppliers feeding the companies annually, cost saving in materials results in substantial increase in competitiveness. Therefore procurements from low cost countries has gone up from 30%in 2004 to around 50% in 2008. Since Electrolux is intending introduce the Tumble Dryer Machine in India through a disruptive marketing technique, it has to develop a marketing plan which would address some of the customer’s concerns like the high cost, service, Gas etc. A machine priced within the reach of the customer, backed by proper installation and servicing arrangement would help establish a deep penetration and high market share. It should find the answers to the following needs: • Identifying the potential customers and targeting specific segment most suitable for launching the product. • What will be the strategy for pricing the product, after assessing the target customer and his capacity to pay? • What methods of distribution and sales channels are to be employed for marketing the product decided upon? • In what time frame the plan will be implemented? 3.4 Mode of Entry Electrolux has three options to enter a foreign market. It can directly export the product or do this through other Exporters. It can also manufacture in the target country and market the product. The option of Direct Export is not preferable since it would take away control from the Exporter and leave it in the hands of the country level Importer or Agent. Since the Company’s long term goal is to dominate the market in India for Tumble Dryers, leaving the control in the hands of the Agent is not desirable. Direct Manufacturing and marketing by the Company, (Woodcock, Beamish, & Makino, 1994). India is an option which will delay the entry into the Indian market and hence not viable. That leaves Indirect Export to India as the only viable option. It would help reach the customer. get feed back and fine tune all aspects of product development for the manufacturing phase, and prepare the company to upscale the products and quality range as and when the actual production in India commences. 4.0 CONCLUSION The above discussion gives an analysis of the structure of competition in the Indian market for tumble dryers. Since there is a small representation of tumble dryers in the Indian market, and culture, it is significant to analyze the barriers that would await the launch of the Electrolux tumble dryers in India. As already said, there are no such technical barriers to the entry, but the entry will not be easy. There are a humble number of manufacturers who have jointly a very large market share and which are of course very stable. These facts assume that it’s difficult for new producers with new products to create a certain significant position on this market. 5.0 REFERENCES 1. Beamish, P. W. & Banks, J. C. 1987. 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