The VSM Group

Résumé du document

VSM group has been developing, manufacturing and selling household sewing machines for more than 130 years after its first sewing machine was launched in 1872. It became an independent company after it was divested from Electrolux and acquired by the investment fund, Industri Kapital in 1997. With the arrival of the new CEO, Mr. Jorgen Johansson, the company carried out a series of polices to survive and develop in the new circumstances.

However, after a lot of strategic choices and changes, things are not so optimistic for the VSM Group, as a matter of fact the sewing machine market has kept declining in the past 20 years and the VSM group has encountered sharp competition from Asian manufacturers as well. In addition, the conflict between the VSM group and its two brands emerged.

The Porter's five forces framework helps to identify the sources of competition in an industry or sector. It has similarities with the PESTEL framework, but tends to focus on strategic business units rather than the whole organization. The Five forces framework looks at five key areas namely the threat of entry, buyers' power, suppliers' power, threat of substitutes, and competitive rivalry. It helps to understand both the competitive forces in the industry and the attractiveness of a new industry. The more powerful these forces are in an industry, the lower its attractiveness will become.

There are three main competitors which are all from Asia. Janome is the largest competitor by volume, and is specialised in domestic sewing machines and obtains several important industrial innovations. The second competitor is Brother, which is famous for office machinery, but it is also active in the sewing industry. Its innovative products' prices are lower than those of VSM as much as 20-30 percent. The third competitor is Juki which manufactures both domestic and industrial machines as well as computer-controlled machines, but it does less for products development.

Extraits

[...] What was likely the best way for the US market would have changed on the European market. Therefore they needed to make a clear strategy, otherwise the partly ‘trail-and-error process' would go on. Furthermore, Pfaff had grossly underestimated the costs associated with the German market and made losses for years. VSM Group could not maintain this low price, so they pushed their price up. As a result of this, VSM had incurred losses for five years in the German market and market penetration was not achieved. [...]

[...] There are three main competitors which are all from Asia. Janome is the largest competitor by volume, and is specialised in the domestic sewing machines and obtained several important industry innovations. The second competitor is Brother which is famous for office machinery but it is also active in the sewing industry. Their innovative products' prices were lower than those of VSM as much as 20-30 percent. The third competitor is Juki who manufactures both domestic and industrial machines as well as computer- controlled machines, but they did less for the product development. [...]

[...] By creating difficulties for imitation, first, as they developed high- technological products. Then, by achieving to have a brand well valued by customers: thus, the brand with its name, image and reputation - becomes an intangible asset which has an imperfect mobility. With the significant place of technology in the sewing machine markets, VSM was when Runnquist arrived - in kind of hypercompetitive conditions. They reacted in two different ways. First by repositioning on the strategy clock, to tend to a focused differentiation strategy. Then, by overcoming competitors' barriers. [...]

[...] They can also discontinue the product, liquidating remaining inventory or selling it to another firm that is willing to continue the production. But there is a third alternative since they can expect a loyal niche market and go on producing sewing machine reducing the costs. The third dilemma of VSM for the future is the growth of geographical markets. Their main market is the United States, and then comes the European market. But they have to think about the Asian market: as sales are decreasing they have to find new customers in other places. [...]

[...] Strategic Choices 1. Bases of competition To compete better, VSM had to implement a new strategy. First, the new manager Runnquist decided to improve the company's market orientation. Thus, he decided to focus exclusively on the Husqvarna Viking product line which had a higher price and was technology-oriented. In consequence, VSM provided products that offered benefits different from those of competitors whose priority was often a lower price. For example, VSM launched the Designer a new software-controlled model of sewing machine. [...]