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Electrolux Company’s Analysis and Audit Essay


Stakeholder’s analysis

Stakeholders could be regarded as people, organisations or members within a given community who affect the operations of the company at stake. The expectation of the different stakeholders influences the decisions undertaken by the firm. On the other hand, meeting all the demand of the stakeholders may be challenging, and the most managerial decision often fails to meet these wants. There are different groups of stakeholders. These include;

Economic stakeholders

These include the suppliers, competitors, distributors and the company shareholders. In Electrolux Company, these stakeholders are influential as they determine the profitability and sustainability of the company. For example, without the suppliers, the company will not be able to acquire raw materials easily. Competitors are also likely to cause an economic problem in the company. The major competitor is Whirlpool, LG, Sony, Samsung and other manufacturers of domestic and professional appliances. There are also the company shareholders, the suppliers these stakeholders have the greatest impact and should be highly considered during the strategic planning process

Social, political stakeholders

These stakeholders include policymakers, regulators and government agencies. The policies and laws developed by a given nation significantly affect the business operation and hence this group of stakeholders must be factored in. For Electrolux, the strategic manager should take into consideration the local and international laws and policymakers in the countries they invest in some of the key political stakeholders is are in the USA, Europe and Sweden.

Technological stakeholders

These encompass those who adopt new technology as well as those developing these technological solutions. They are important to the organisation as they influence the new products and services be developed.

Community stakeholder

These are those stakeholders who are affected by what the community does.

Stakeholder mapping

The various stakeholders’ in the Electrolux Company were mapped on the power interest matrix. In this matrix, the stakeholders are analysed depending on the level of interest as well as the power that these stakeholders have to influence the decisions that are made by the company. The resulting matrix is shown in table 1 below.

A
  • Community members
  • Competitors
B
  • Activists
  • Employees
  • Suppliers
C
  • Political groups
  • Government (USA, Europe, Sweden international community )
D
  • Electrolux Customers
  • Electrolux Owners
  • Electrolux Shareholders
  • Financial community

During the strategic decision-making process, the key stakeholders are c=grouped, as shown in table one. In section A, we have the community members and competitors; the two have low interests in the strategic process and also have no power in influencing the decisions that are made. In the second category (B) we have the stakeholders with high interest but low power, these include the activists, employees and suppliers of Electrolux. Any decision may affect them, but they don’t have enough power to influence the decisions that have been made. Group C are stakeholders who have power but little interest in the company, for example, the state/government. They include the policymakers. Electrolux must ensure that these policymakers are satisfied by following their rules and regulations. The fourth groups of stakeholders are the most important as they have the power to influence the decisions made as well as very high interest in the company. These groups of stakeholders are the key players, and their opinions must be taken into consideration. For group A, the Electrolux should exercise minimal effort during the decision-making process. For group B, the stakeholders must be properly informed, for group C, the company must satisfy the requirements while group D, the company should consider them as the key players.

Electrolux organisational audit

To conduct an organisational audit of the Electrolux Company, the SWOT analysis and the porters’ five forces were used. The strength and weaknesses are controlled by the internal environment, while the opportunities and threats are controlled by the external environment (John 23).

The resulting SWOT matrix table is shown below.

Positive forces Negative forces
Strength Weaknesses
  1. Electrolux company has been in operation for many years, and they have experience in the manufacture of domestic products
  2. The company has experienced workers
  3. Electrolux products have a unique brand
  4. Economies of scale due to their large operating volumes (the company can buy raw materials cheaply )
  5. Globalisation has enabled the company to increase its market size
  6. High quality and reliable products
  7. Well established distribution channels of retailers
  1. Demerger of the company so that they concentrate on domestic appliances has affected the company’s performance
  2. Lack of well-established distribution channels especially the large retailers such as home depot and lowe
  3. Costly products
Opportunities Threats
  1. Large market, both locally and internationally.
  2. The market is conducive, and it promotes healthy competition.
  3. Technological changes are likely to introduce new products.
  1. Very high competition in the domestic market with companies such as Whirlpool, Samsung, LG and other offering similar products.
  2. The acquisition of Maytag by Whirlpool as well as other future acquisition by the competitors.
  3. The threat of better and innovative products from competitors.

From the SWOT analysis that was carried out, it can be seen that the company experience, globalisation and large labour force are some of the company’s internal strengths. The main weaknesses are lack of proper distribution channels, costly products and demerger. In light of this, it is necessary that the companies ventures into the dealership with retailers who can market products to the final consumers. The company should also diversify to increase their profits. In this case example, we see the company demerging and losing the outdoor products instead of diversifying to other products. Looking at the current trends, most of the companies are diversifying, and this is imperative for Electrolux.

The major threats facing Electrolux are the high competition that exists in the local and international market. The company must develop appropriate strategies to counter these competitors. The company should also innovate as a means of developing competitive advantages

Porter’s five forces

Porter’s five forces is a vital tool in assessing the attractiveness of a given industry. During the potter five force analyses, the five competitive forces that are examined are: the threat of substitutes, the buying power, the supplier’s power and the rivalry between competitors

The threat of substitutes – normal

There are many substitutes that have been developed by the small industries that supply domestic appliances. The substitutes are developed from inferior materials and are less costly as compared to the Electrolux products. Owing to the regulations in the USA, Europe and other developed nations, most substitutes are not available in the market, and hence the threat is normal.

The power of the buyers – high

The domestic appliances market is very large in the developed nations, especially in the USA and Europe. The buyer for Electrolux products primarily comes from the retailers, dealers and ordinary consumers. The retailers purchase products in large quantity and distribute these products to the final consumers. Dealership seems to be the most viable option as the retailers and dealers buy products from the company. Based on this, most of the dealers and buyers can purchase the products in bulk and sell to consumers. Due to competition t, Electrolux must cut prices to make their product profitable to the dealers and thus increase sales.

The power of suppliers – normal

The supply of the raw materials used in manufacturing the appliances is readily available, and there is high completion. This means that the Electrolux can buy raw materials at a low, competitive price. The company can also integrate backwards and start producing most of the items being supplied by contractors. In terms of the supplier, the threat is normal

Rivalry from competitors – fierce/very high

In the market, there is very high competition. Most of the companies are producing domestic appliances, and these are sold in the USA. Also, the competitors have adopted various strategies to drive costs down, attract customers and brand their products. Companies based in Asia (LG, Sony and Samsung) have penetrated the USA market, and this has increased the competition. The competing companies are all international companies, and this means they have the power to develop and implement strategies to take up a larger portion of the market. The acquisition of Maytag by whirlpool has enabled this firm to gain a high competitive advantage over Electrolux. Asian based companies can produce at low costs and sell these products abroad at relatively low prices. The competition for the products is heightened by the fact that products differentiation is only achievable through modification of the product shape, increasing the functionality of the product and price changes. The competitors can develop mechanisms for countering the actions and plans of Electrolux. This low product differentiation increases competition.

The threat of new – normal

The threat of new entrants is normal. Due to the intense rivalry and competition, new market entrants will be faced with severe completion, and this acts as a de-motivation to new entrants. However, companies with new innovative products can use this as leverage and a market penetration strategy.

Electrolux environmental audit

The environmental audit entails a critical survey of the Electrolux external environment. The PESTEL analysis will be used; this will show the opportunities and threats that exist outside the business environments (David 5). The PESTEL framework categorises environmental factors into six main areas. These are political, economic, social, technological, environmental and legal factors.

Political factors

In the areas where Electrolux operates, the political environment is stable. The USA and Europe have a well-regulated environment that allows companies to operate in a free and fair manner. With globalisation being accepted internationally, most companies can operate in most of the countries.

Economic factors

The countries where Electrolux operates have good monetary laws that prevent inflations and price fluctuations. The economic conditions are good, and the buyers have the power to purchase the products to be marketed. The countries have a good growth rate, and fuel prices are stable. The economic environment is favourable for the operation of this business.

Social

The society in the USA, Europe and other areas where Electrolux operates has many consumers who want to buy state of the art domestic appliances. There is an increase in the use of appliances that the company provides. The population in these countries is enormous, and this creates a large market for the domestic appliances which Electrolux supplies. There is also a large market for those people weighing to upgrade their products. The populace is also conscious about the technological changes and would like to purchase new products that are being availed in the market.

Technological factors

The domestic industry market has got many competitors, and they compete based on technological improvements to the appliances. Most of the competitors are currently manufacturing products that save energy, and the consumers are receptive to them. The competitors also try to increase the functionality of the appliances through the use of automatic control, among others. For Electrolux to be successful, they must continually innovate to develop efficient and energy-saving products.

Environmental factors

Due to the environmental pollution and green house warming, most countries like the USA, Europe and other countries where Electrolux operate are advocating for the use of an appliance which consumes less wattage and saves power. Environmental regulations also require companies to perform a life cycle analysis so that the product be made does not significantly affect the environment.

Legal factors

The legal and regulatory framework in all the nations where Electrolux operates is well established, and the business milieu operates within these frameworks. There are well-established tax laws, contract laws, consumer protection laws, health and safety, among others. The company must operate within this framework.

Analysis of the possible strategies

To determine the company’s growth strategy, it is necessary to draw the Ansoff growth matrix. The matrix indicates that a business can grow using four main strategies; these are:

Market penetrations: in this regard, the company seeks growth with the existing products by increasing its market share.

Market development: the company tries to market its products in a new market

Product development: the company seeks to develop new products in response to the consumer wants or to counter a competitor. Once these products are developed, they are sold in the existing market.

Diversification: the company develops new products and also expands to new markets

The Ansoff matrix was used to analyse the alternatives and strategies that Electrolux are using. The resulting matrix is shown below.

CURRENT PRODUCTS NEW PRODUCTS
CURRENT MARKETS
  • Market penetration
  • Cutting costs
  • Cutting the operations costs
  • Brand development
  • Outsourcing motors and compressors
  • Moving production to low-cost countries
  • Ensuring that production is efficient
  • Improving logistics
  • Improving the supply chain
  • Product development
  • Development of new products
NEW
MARKETS
Market development Diversification

From the analysis of the current strategies adopted by Electrolux, it can be seen that most of these are based on improving the current strategies to ensure that the company gains a bigger market share. The company also plans to develop new products, but this has not taken into great consideration. Most methods are on cutting production costs and improving the efficiencies of service delivery.

In future, the company should look into the possibility of expanding to other markets in Asia and Africa where the competition is not very high. Product development should also be taken into consideration. The company should develop appliances with increased functionality, more digital controls and user programming as well as the development of energy-saving domestic appliances. Electrolux can also develop new products and move into the new markets. Though diversification is a risky venture, it could result in the generation of high sales volume and increase profitability.

Electrolux future strategy

I would select the development of new products as the best strategy for the company. The new product to be developed should be cost-effective, more efficient, have increased functionalities and be energy saving. This strategy should be employed in all the appliances that they manufacture. This is a feasible option in the long run as product differentiations, and low prices should result in increased market share and the development of strong brands

Vision, missions and goals

A strategy can be regarded as the long term direction that a given firm would take. A strategy defines the long term objectives of a given organisation and enables firms to define the methods that will be used to achieve competitive advantages (Vijay 32). In line with the strategies, there is a strategic statement which sets forth the organisational goals. These are the vision, mission, objectives and goals and core competencies.

Vision: this statement indicates where the organisation wants to be in the future. It helps the company mobilise energy towards the achievement of these goals. For example, the Yahoo visions statement is “to deliver your world, your way” while that of Electrolux vision is “To become the best appliance company as measured by customers, employees and shareholders”. Nokia’s vision is “a world where everyone can be connected.”

Mission statement: this statement gives the overriding purpose of the organisation. It is the central strategy of the organisation and helps managers focus on the key strategy

Objectives: This statement outlines a quantifiable statement about company goals. The objectives show the expected results based on numbers which can be quantified and measured.

Goals: these are the main endeavours that the company wishes to undertake.

Issues with strategic planning

Strategies can be defined as the long term goals and scope of the organisation. Strategic decisions should be carefully formulated, taking into consideration the various issues that hamper the implementation of these strategies. In the yahoo case, the organisation did not have a clear focused vision. Due to the large size of the organisation, everything was not being handled clearly and precisely. The next problem was the lack of ownership and accountability. In terms of achieving the strategic goals, the company didn’t give clear roles and responsibilities to the workers. This was coupled with a lack of ownership as the management didn’t own the strategic decisions, and they were found to be pursuing the same goal over and over again. Their other problem was lack of decisiveness. To solve yahoo problems, three key pillars were to be established. These were: focusing on the vision, ensuring that there were accountability and responsibilities were delegated appropriately and ensuring that the strategic plan was implemented. The main issues affecting the strategic plans are

Uncertainty

The future of any organisation is uncertain, and this issue affects the implementation of the strategic objectives.

Operational decisions

Strategies must be linked with organisational decisions. This usually presents a problem, especially for managers, as they have to make decisions that are in line with the strategic plans.

Integration

There is a need that managers integrate the strategic goals with the company functions and operational as well as with the other organisations. Yahoo can use an integrated approach with big companies such as Sony.

Relationship and networks

It is important to link the strategies with the customers, suppliers and other stakeholders who play a crucial role in the business. Yahoo strategies should link with those willing to advertise and the mail service users.

Complex organisations and the change process

Most of the large multinational companies have problems with the implementation of the strategic objectives, especially where changes in the way issue are handled. Managing change is rather complex in large organisations.

Different planning technique

Different planning techniques are used in strategic planning. The most common method is the Boston Consulting Group (BCG) matrix. The matrix has four portions; these are stars, question marks, cash cows and dogs.

  • Star: this is a promising business venture that will be undertaken shortly
  • Question mark: this is a business unit that doesn’t have a high market value
  • Cash cow: this has a high market share in a mature market.
  • Dog: this has a low market share in a static and declining market

Roles and responsibility for strategic implementation

The strategic implementation of the strategic plan has four main elements

Identification of the goals and objectives: The expected results are outlined

Formulation of the specific plan: the developed objectives are then changed to specific tasks and deadlines

Budgeting and resource allocation: this entails allocating the funds to the developed plans

Monitoring and control: this entails checking whether the set objectives have been met within the stated timelines and budget.

The complexity of the implementation process depends on the size of the organisation, the size of the change process and the degree of uncertainty that exists in the market.

Resource requirements

During the process of strategic plan implementation, resource allocation is one of the key issues that should be taken into consideration. The main considerations that are taken into account are the contribution that the resources have in the fulfilment of the organisation’s strategic plan. Resources should be diverted from the cash cows to star projects which have long term capacity. The resources must also be allocated to activities that will develop the key strategies.

Targets and timescales

The strategic plan implementation process entails the transformation of the plans into quantifiable operations activities that will result in the change process. The following must be taken into consideration:

The strategy developer: at most times, managers are responsible for the creation of the plans, and they should be accountable during the implementation process.

After formulating the team, the task of each team members should be outlined

Communication: communication is important prior, during and after completion of the implementation.

Monitoring: the project must be monitored so as to ensure that the objectives are met within the specified timelines and budgets.

Works Cited

David, Aaker. Developing Business Strategies, 5th edition, New York: Wiley, 1998. Print.

John, Bryson.Strategic Planning for Public and Nonprofit Organizations: A Guide to Strengthening and Sustaining Organizational Achievement, 3rd Edition, New York: Jossey-Bass, 2004. Print.

Vijay, Govindarajan and Chris,Trimble, Ten Rules for Strategic Innovators: From Idea to Execution, Harvard: Harvard Business Review Press, 2005. Print.

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