1. CASE STUDY ON:
ELECTROLUX
Arunesh Chand Mankotia

2. CASE SUMMARY
 Electrolux, a Swedish company is the world’s
largest manufacturer of household appliances.
 More than 85% of its sales was from outside
Sweden. Over 50% in Western Europe & 30% in
North America.
 In early 2001, company employed approx.. 85000
people worldwide, had 150 factories, 300
warehouses located in 60 countries & sold about
55 million products per year in 150 countries.
 Demand for household appliances in Western
Europe & North America was limited- 2% to 3%
annually.
 Electrolux undertook expansion strategies in Asia,
Eastern Europe & Latin America. It was estimated
that demand would grow at 20% annually in these
countries.

3. STATEGIES ADOPTED FOR
EXPANSION
Different approaches were adopted for different
countries which included acquisitions of going
concerns, Green-field developments, Joint
Ventures and enhanced marketing.
 In Eastern Europe it acquired Lehel, Hungary’s
largest manufacturer of household appliances.
 Green-field developments in Russia, Poland &
Czech Republic.
 In Asia there was a need to adapt to local
conditions. In India & China Electrolux was
compelled to work through joint ventures.

4.  In Southeast Asia, the emphasis was more on
marketing of imported goods from China, rather
than local production.
 In Latin America it went for acquisitions. In 1996
it acquired Refripar, the largest producer of
refrigerator products in Brazil.

5. GLOBAL COMPETITORS
 General Electric
 Whirlpool
 Bosch-Siemans of Germany.
These competitors also had similar plans
for expansion in Asia, Eastern Europe &
Latin America.

6. OBJECTIVES OF ELECTROLUX
 Short-Term Objective
> To double its sales in Asia, Eastern Europe & Latin
America from $1.35 billion in 1994 to $2.7 billion
in 1997.
> Electrolux to become one of the top 3 suppliers of
household goods in Southeast Asia by 2000.
 Long-Term Objective
> Globalize its production and sales base.

7. PROBLEMS FACED BY ELECTROLUX
Serious weaknesses developed in
Electrolux’s global production system.
 Although the company expanded rapidly via
acquisitions, but had not rationalized its
production process.
 There was often duplication of facilities.

8. SWOT
ANALYSIS

9. INTERNAL ENVIRONMENT
STRENGTHS WEAKNESSES
 World’s largest  Profit slump exposed
manufacturer of weaknesses in
households appliances Electrolux’s global
with sale of around $14 production system
billion.  It expanded rapidly via
 Co. employed approx. acquisitions but didn’t
85,000 people rationalized its
worldwide, had 150 production operations.
factories & 300
warehouses in 60
 Duplication of facilities
countries. within the region.
 Prepared to spend
million $ per year to
increase the presence in
emerging markets

10. EXTERNAL ENVIRONMENT
OPPORTUNITIES THREATS
 It can expand in  Threat from global
developing as well as competitors - GE,
under developed Whirlpool & Bosh
countries. Siemans.
 Approaches such as  Competition from
acquisitions, JV & existing dominant
green field players in the
development can be domestic market.
considered for further
capturing the markets.

11. SOLUTION
 Michael Treschow, announced the Restructuring
plan that called for the loss of 12,000 jobs and
closure of 25 factories & 50 warehouses.
 The restructuring plan lasts for more than 2
years and divestment took place certain areas
(like food & beverages vending machines) to
streamline the operations.

12. Future strategies for expansion: -
 New product-line organization in Europe
and US.
 Restructuring program to improve under-
performers.
 Stricter criteria for investments requests.

13. CASE DISCUSSION
QUESTIONS

14. Ques. What theory or theories,
best explains Electrolux’s FDI
decisions during 1990s:
 The market imperfection approach
 The strategic behavior approach
 The product life cycle approach
 The location specific advantages approach?

15. Product Life Cycle Approach
Electrolux's FDI decisions during 1990s can be
best explained with this approach. According to
this Approach firm undertakes FDI at particular
stages in the Life Cycle of a product, they have
pioneered.
 Demand for household appliances was mature in
Western Europe & North America.
 Growth in these regions were limited to
replacement demand & the growth in population &
unlikely to exceed 2 to 3 percent annually.
 To maintain its historic growth co. can’t depend on
these matured markets & have to find new
markets in developing world.

16. Strategic Behavior Approach
This approach says that FDI flows are
reflection of strategic rivalry between the
firms in global market place.
• There were three global competitors – GE,
Whirlpool & Bosch Siemans and they were
following competitive moves.
Also a firm can raise entry barriers and shut
new competitors out of an industry.
• In 1991 Electrolux acquired Lehel, Hungary’s
largest manufacturer of household appliances,
when it entered into Eastern Europe.

17. Market Imperfection Approach
Few FDI decisions were based on this
approach as there were impediments to
exporting.
 There were import barriers, which made direct
exporting from Western European and North
American plants uneconomical.
 Government tariffs on imported goods,
increase the cost of exporting relative to FDI.

18. Location Specific Advantages Approach
 This approach does not hold true as there were
no advantages that Electrolux can exploit from
foreign markets.
 This is true especially in case of natural
resources, such as oil & other minerals, which are
specific to certain locations.

19. THANKS