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Systems in action: Electrolux

Updated Wednesday, 18th May 2005
How did one company cope with falling profits and a takeover? What can we learn from Electrolux?

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In 1982 Electrolux was on a downward curve. This case study shows how it transformed itself from a failing company with falling profits and the company's takeover in 1983 by Zanussi.

Part One

 

Part 5

Harold Carter
What we see is that they were taking on lots of debt, and at the same time as they were taking on all that debt, they were spending a lot of money on acquiring fixed assets.  What went wrong was that they bought lots of expensive plant and that created a debt service burden which they weren’t able to carry, and that pushed them into a position of unprofitability.  Clearly Zanussi were trying to compete by investing.  I mean they must have decided that it was strategically important to invest, to actually build up their fixed assets in such a way probably as to be able to push their production costs down...

Narrator
That’s how two experienced tutors set about interrogating and making sense of this particular case study. 

Taking part 

Working with case studies is an opportunity for students to work with other managers, sharing ideas and probing questions in an environment where mistakes don’t matter.  Many students bring to case studies considerable insight from their own work, and the contribution of this knowledge plays an important part in the success of a case study session.  Ultimately the importance of these sessions lies in how people use models and frameworks to make sense of a situation, so they can use and apply them in their own work environment.

Course student reporting back to group
There were two principal reasons why we felt the Electrolux move had been preplanned.  Number one was the addition of extra and additional production facilities, which we know from the component suppliers would result in unit cost reduction.  So in terms of that we felt that Electrolux had a fairly high cause for action.  So we were putting them sort of about there.

Course tutor
Towards the end of a case session, I think we’d move to the generalisable lessons that could be applied, and in several of the cases that we've been looking at this week, the later questions move from the specific case to what are the overall lessons that can be applied.  For example, in the public sector case we ask each student to identify an insight that they could use for their own work back home, and we get issues about managing multiple stakeholder relationships, having to work with unusual joint alliance partners, things like this, that they can identify with quite readily.  And issues like the acquisitions across Europe right now are extremely topical, and many of the students have been involved on the taking or receiving end of acquisitions in one way or another, so we can generate particular lessons out of it.

Narrator
So what did this particular group of students working with the Electrolux case study believe they would take back with them to their own jobs?

Female student
For me it’s the right moment to see the application of the course concepts that we've been studying, and especially as far as I'm concerned when they regard industrial environment.  Some other case studies sometimes may be just a bit theoretical but at least they're interesting to hear about.

Male student
You don’t expect to find a case study which exactly emulates your job.  What you're really trying to do with the case studies, and I think that the case studies are useful in that sense, that it’s the opportunity for you to apply the models you’ve learned throughout the course and the theories you’ve learned throughout the course in a simulated situation.  And that experience will allow you to then learn something and bring it back to your organisation.  That’s the whole idea of the case study, it’s not exactly try to find a case study that exactly matches your organisation, because I doubt you will be able to find it.

Male student
I just used the concepts and so forth to understand for example how a decision is made at a higher level which seems totally illogical to me.  I know now where to go and start looking for the information to actually understand why that decision was made which would have seemed illogical to me before I started doing these studies.

Male student
There’s one thing that is different between case studies and normal business life, that in these case studies we all, we share the objectives who want to join this residential school and take the best with us.  When you do business then the interests are very different, and also in a multicultural environment, and then the problems may begin, but here we all try to get to the same goal.

Female student
We work together as a team and we learn from one another.  We share different views, perspectives.

Male student
We have to support each other because otherwise you will not come to a conclusion and you're not able to prepare or to make a presentation.  So you have to work together and I think the good thing is that many of us bring in different backgrounds and so they bring in different ideas and you come to a better synergy.

Narrator
So case studies provide students with the opportunity to gain real experience of managing in complex situations, without the risk of making mistakes which matter.  The key points we would like you to take away from this video are:

  • case studies are important because they provide experience of using models and frameworks;
  • they are non-threatening;
  • lessons can be generalised, there are no right answers; and
  • case studies are an opportunity for students to learn from each other.

5’27” 

 

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