Electrolux challenges in the appliance industry - Essay Example

Electrolux challenges in the appliance industry College AB Electrolux Company was founded in 1908 by Axel Wenner-Gren. Although it is a famous manufacturer producer all over the world, The Company has faced numerous operations challenges over a long period of time. During the market recession time, the company had tried to achieve its vision through making several transitions of producing different product to meet the market demand. The first transition that Electrolux had done was when World War II started; they have produced air filters and steel fittings instead of the vacuum cleaner (Hill & Jones, 2012).

This new product line had provided a new opportunity for company to develop sustainability. Moreover, reducing the cost always could be an efficient way for the Electrolux’s sustainability, the company has relocated approximate 60% of its manufactures to low cost countries like China, India, and Mexico, and it also has reduced its overall energy consumption. In addition, Electrolux has focused on few issues, such as climate change, sound business practices, responsible sourcing and restructuring (Hill & Jones, 2012).

Those new strategies helped Electrolux to gain more customer, saved more asset for more investment, furthermore, the strategies helped company to receive more subsidize from the government, this was a major way helped the company’s sustainability directly. The strengths of Electrolux is that it is a well-established company who has kept their head above water and have emerged a greater threat in the market due to their cost efficiency strategy. Electrolux does encounter weakness in their market, mainly currency risk due to operating in dozens of separate counties.

Due to their manufacturing utilizing 20% of raw materials they face a larger manufacturing cost as well (Hill & Jones, 2012). Electrolux’s major threats are their number one competitor Whirlpool, as well as increase in labor costs due to Asian wage rises. However Electrolux does have many opportunities they can capitalize on such as becoming the leading socially responsible company in their market. Also the rise in the middle class population suggests that appliances demands should rise which leads to an increase in sales revenue (see appendix A).

To measure the efficiency of Electrolux, it is noticeable that the company is not efficient due to its low operating margin. To fix this problem, Electrolux should consider the economic recession and focus more on the inelastic products such as washers and dryers. Since they are a necessity, consumer will spend money on them regardless of their income, so an increase in price will increase the operating margin. When looking at the quality, Electrolux is doing a well in the consumer durables sector; however, there is not enough focus on the professional products sector because the sales were very low compared to consumer durables.

Considering that professional products have the highest growth rate and the highest margin products, it should invest more to improve its quality which will lead to an increase in sales. Innovation and consideration of the consumer needs play a huge role in this industry; therefore, Electrolux should ask for customers’ feedbacks and suggestions through its website to understand their needs and develop the right products for them. Electrolux is offering high quality products for a high price, so it is not responding to the other classes’ needs.

By doing so, it losing a lot of market share especially that the number of middle class households is increasing. Therefore, the company should extend its product line and create suitable products for low-income class, middle-income class, and high-income class. ReferencesCharles W. L. Hill & Gareth R. Jones. (2012). Strategic Management: An Integrated Approach. New York: Cengage Learning Appendix A