Running head: ANALYSIS OF CORPORATE STRATEGY OF AB ELECTROLUX 1

Analysis of Corporate Strategy of AB Electrolux

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Analysis of Corporate Strategy of AB Electrolux

Introduction

Electrolux is one of the top global appliance companies with its headquarters in Stockholm,

Sweden. Started in 1919 by Axel Wenner-Gren, the company has witnessed significant growth

and currently boasts of selling approximately 60 million domiciliary products in an estimated 120

markets annually (Electrolux Group, 2020). Electrolux manufactures a wide range of products;

these include; vacuum cleaners, dishwashers, washing machines, refrigerators, air conditioners,

cookers, and other small home appliances.

Barney’s VRIO Framework Analysis of Electrolux Competencies.

VRIO framework is the tool whose main application is the analysis of a firm’s internal

resources and capabilities to ascertain if they can be an origin of sustained competitive advantage.

VRIO analysis, developed in 1991 by Barney, J.B., stands for four questions. The questions

include if the resource is valuable, rare, costly to imitate, and the firm’s organization to capture

the value of the resources (Bel, 2018). Any resource that satisfies these four requirements

contributes to sustained competitive advantage for the company. In the case of Electrolux, the

VRIO analysis is on employee excellence and leadership development. The analysis is as follows:

Valuable? Yes

Rare? Yes

Costly to imitate? Yes

Is the company organized to capture the value of the resources? Yes

Result: Sustained Competitive advantage.

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Electrolux’s ability to manage the factors of production efficiently distinguishes it from the

rest of the firms and helps cut costs for the company at large. Unlike other firms, Electrolux molds

its employees into all-rounded leaders who are able to take command and steady the ship even

further when called upon. The company’s leadership model tasks those in charge with the

responsibility of both business and people leadership, allowing for the evaluation and growth of

future leadership capabilities. This particular way of building leadership skills is valuable to the

company and very rare in the business world (Electrolux Group, 2020).

Competition with Chinese Manufacturers

Electrolux is a global brand with a worldwide market reach, Asia notwithstanding. An

increasing number of people transitioning into the middle class in Asia is likely to increase the

available market for Electrolux products. Electrolux being a worldwide-recognized brand, is likely

to perform better than Chinese manufacturers who have a history of substandard goods. The human

need to own the best and sometimes exotic products only reinforce the great a future Electrolux

has and, with time, will become a force to reckon with in Asia. Furthermore, the company's

investment in research and development of new products to fit this particular demography and its

significant capital base will also work to its advantage (Bel, 2018).

The Three Leading Perspectives on Strategy, And Their Influence on Electrolux

The first branch of the tripod-based approach is the industry-based perspective that

associates the performance of a firm with the industrial conditions the firm competes (Su, Peng &

Xie, 2015). Cutthroat competition helps the firm in developing better, more efficient, and cost-

effective ways of production in coming up with rare, valuable, hard to imitate product. Electrolux,

therefore, should look into developing new products to have a competitive edge.
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Institution-based perspective analyses a relationship between institutional framework

difficulties facing the firm and its performance. We draw similarities between the challenges faced

by Electrolux and other companies in the same field. These challenges might include high prices

and costs of production. As a result, the prevailing economic conditions in a country influences

the decision to set up shop in that particular country. It is, therefore, the firm's task to come up

with the best ways to exploit the economy in times of boom.

The resource-based view draws a correlation between the company's success and the

number of resources it can put together. These resources can be financial or human. A firm's ability

to get the most out of the available pool of resources puts it in the driving seat towards success and

market dominance. Management at Electrolux should, therefore, ensure the company resources

are used to their optimum ability.

Porter’s four generic strategies

The competitive ability of a firm determines its profit margins. This competitive advantage

leads to the four generic strategies that are; cost leadership, differentiation, cost focus, and cost

differentiation (Viltard, 2017). Cost leadership arises when the company is hell-bent on spending

as little as possible in production. Differentiation strategy involves the company's desire to stand

out qualitatively in the industry in order to attract more clients. The focus encompasses choices in

the small competitive scope present in the industry. Finally, in cost focus, the company looks for

cost-intensive ways of doing business. The most effective strategy for Electrolux is cost leadership.

Reduced cost of production will lead to corresponding lower product prices hence more sales.
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The Corporate Culture Of Electrolux and Two Distinct Attributes Of Culture Within

The Organization.

Electrolux corporate culture is built around innovation. The company places its focus

extensively on devising products and solving the needs of society at various levels. Close

proximity to the customers improves interaction with these customers hence improved sales

(Electrolux Group, 2020). Employees at Electrolux are passionate about their job, and this passion

is reflected in the great quality of the products.

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References

Electrolux Group. (2020). Charismatic and creative, Wenner-Gren laid the foundations for

Electrolux marketing - Electrolux Group. Electrolux Group. Retrieved 26 February 2020,

from https://www.electroluxgroup.com/en/charismatic-and-creative-wenner-gren-laid-

the-foundations-for-electrolux-marketing-26762/.

Su, Z., Peng, M., & Xie, E. (2015). A Strategy Tripod Perspective on Knowledge Creation

Capability. British Journal Of Management, 27(1), 58-76. https://doi.org/10.1111/1467-

8551.12097

Electrolux Group. (2020). History - Electrolux Group. Electrolux Group. Retrieved 27 February

2020, from https://www.electroluxgroup.com/en/category/history/.

Viltard, L. A. (2017). Strategic mistakes (AVOIDABLE): the topicality of Michel Porter’s generic

strategies. Independent Journal of Management & Production, 8(2), 474-497.

Bel, R. (2018). A property rights theory of competitive advantage. Strategic Management Journal,

39(6), 1678-1703.
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