Marketing

CASE STUDY

ELECTROLUX ACQUISITIONS

Electrolux, the world’s largest manufacturer or electrical household appliances, once pioneered the marketing of vacuum cleaners. However, not all products bearing the Electrolux name have always been controlled by the Swedish firm. For example, Electrolux vacuum cleaners were independently sold and manufactured in the United States from the 1960s until 1987. The Swedish firm also manufactures Eureka vacuum cleaners.

Electrolux pursued its early international expansion largely to gain economies of scale through additional sales. The Swedish market was too small to absorb fixed costs as much as the home markets for competitive firms from larger countries. When additional sales were not possible by exporting, Electrolux still was able to gain certain scale economies through the establishment of foreign production. Research and development expenditures and certain administrative costs thus could be spread out over the additional sales made possible by foreign operations. Additionally, Electrolux concentrated on standardized production to achieve further economies of scale and rationalization of parts.

Until the late 1960s, Electrolux concentrated primarily on vacuum cleaners and building its own facilities in order to effect expansion. Throughout the 1970s, though, the firm expanded largely by acquiring existing firms whose product lines differed from those of Electrolux. The compelling goal was to add appliance lines tom complement those developed internally. Its profits have enabled Electrolux to go on an acquisitions binge. Electrolux acquired two Swedish firms that made home appliances and washing machines. Electrolux management felt that it could use its existing foreign-sales networks to increases the sales of those firms. In 1973 Electrolux acquired another Swedish firm, Facit, which already had extensive foreign sales and facilities. Electrolux acquired vacuum-cleaner producers in the US and in France; to gain...