Strategic analysis of VSM (Viking Sewing Machines) group

Résumé du document

In 1997, VSM AB became an independent company and had been bought by an investment fund Industri Kapital. This report analyzes the strategic impact of these events in a global competition and declining market background. In order to understand the VSM case, we have analyzed the new strategic capabilities acquired after the appointment of Mr Runnquist. Then we have focused on the strategic choices of the new CEO. Finally we have studied how VSM Group was organized for success. In addition to the three points, we have also drawn the PEST and the Five Forces models. Since VSM AB has been sold to Industri Kapital, Mr Runnquist changed the strategy of VSM AB completely. The first thing to do was to choose the strategic capability. Mr Runnquist developed new activities and processes through which unique resources were deployed in such a way as to achieve competitive advantage.

Extraits

[...] The second configurational dilemma concerned production capacities. Indeed, the plan located in Karlsruhe in Germany had problems concerning costs. Moving production from Germany to Sweden was very complicated because the German and the Swedish engineering principles were fundamentally different: single-loop manufacturing line and one team of worker to assemble, test and approve machines in Sweden whereas Pfaff machines used a double-loop line. The solution found for this dilemma was the Zetina plant. IV) Macro-environmental influences - the pest framework Five forces framework There are many factors in the environment that influences the competitiveness, not only competitors. [...]

[...] Another method for strategic development is mergers and acquisitions. In 1999, VSM acquired a British producer of software for PC-controlled professional sewing. Svante Runnquist said that is was in order to have a growth of the after-market. In 2000, Industri Kapital decided to acquire Pfaff and the group was renamed VSM group with a new slogan: “changing the world of sewing”. There were two challenges. The first one was that the two brands of the group were partly competed for the same market space: VSM group pull the brands apart on other dimensions than price and quality, dedicated key words and colors for marketing each brand. [...]

[...] In fact, he chose to implement the strategy with a general involvement of all actors in the company. Each employee has access to the strategy document in order to always be in the line with the strategy. This reveals cooperation within the group and a team structure. Control process Change in top management became necessary by integrating managers of sales companies and a marketing vice-president that has direct relation with the client (key of the success strategy) Changing in the operating systems to clarify marketing expenses Collaboration between the marketing and the technical department so that the satisfaction of customers' needs is provided by innovation (today customer value is coupled with production efficiency) following the directives of the new CEO who control the enforcement of his strategy. [...]

[...] VSM also overcame hyper competitors' market based moves with enhanced features (software, customer support), erode their robustness with technological advance, they undermine competitors' stronghold by entering through: exclusive distribution channels (thanks to the" Dealers-Partners" contracts), exploiting home country's advantages, economies of scale and acquisition. And finally, VSM countered competitors' deep pockets by merging with another group (Pfaff) so they could outcome the financial losses due to the fact that Electrolux sold the company to an investment fund (Industri Kapital). Directions and methods of strategic development Development directions are the strategic options available to an organisation, in terms of products and market coverage, taking into account the strategic capability of the organisation and the expectations of stakeholders. [...]

[...] Also, the acquisition of Pfaff in 2000 gave to VSM Group the opportunity to benefit from the Pfaff brand. Indeed, it was a deal breaker. Thanks to this acquisition, VSM Group was in possession of two strong brands that competed for the same market. VSM decided to pull the brands apart on other dimensions than price and quality by keeping a full product range under each brand. This permits to VSM to diversify its products and its targets. The last resource was the takeover of Zetina. [...]