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Electrolux Acquiring Zanussi
1) How would you describe the key characteristics of Electrolux and Zanussi in 1983, in terms of strategy, organization, capabilities, and performance?

International acquisitions have become an extremely important vehicle for growth for multinational companies. In this case, and because of the particular industry in which Electrolux operated in, the trend of the whole appliance industry was facing a long period of crisis. Although Electrolux was and still is one of the largest manufacturers of white appliances, many other manufacturers were now taking market share away from the Swedish company. For example, Philips and Siemens were now introducing a complete and economic line of brand new appliances. Electrolux's core business was vacuum cleaners and absorption-type refrigerators. Electrolux was and still is the typical Swedish firm, which emphasizes on down to earth management: everyone works and keeps his word and all the information is correct. The firm emphasis on technology and advancement and the middle management is open to advises from the workers.

But at the core of Electrolux business strategy was the aggressive plan to expand through acquisitions. First, Electrolux concentrated on acquiring firms in the Scandinavian Area. Then the company continued focusing in purchasing companies that had assets but were not profitable so that they could turn their business around. After making more than 200 acquisitions in 40 countries, Electrolux was certainly one of the most experienced companies on the global scene as far as acquisition. But another important aspect of Electrolux, which helped them, maintaining leadership was the company's great flexibility concerning new products and especially their attitude towards that company which excelled in some business where Electrolux was weaker. The greatest example of this was when the company purchased Husqvarna, a chain saw manufacturer, and how in little time, through this wise take over, Electrolux found itself as the world leader in chain saw manufacturers.

Electrolux never went looking for acquisition or bankrupt companies; their policy was to keep their eyes open that things will come by themselves. When Electrolux was ready to acquire a company, the financial statements of that company were very important. There was no standard method for treating acquisitions but Electrolux emphasized on fast action and on the eventual replacement of the top management in the poorly managed newly acquired firm. Electrolux preferred to change the top managers but to maintain the middle ones. Their goal was to understand and help the company to go back on track without often changing the marketing and sales staff. By 1983 Electrolux was one of the largest manufacturers of white goods with expansion taking place in Europe, North America, Latin America and the Far East. European sales accounted for almost 65% of total sales.


Although Electrolux was and is a multinational firm, one great characteristic of this company is their focus on decentralization. The subsidiaries are always considered as profit center and are evaluated primarily on their returns on net asset. Even the corporate headquarters as far as size, are really small compared to the impressive expansion that this company has witnessed. Zanussi, on the other hand, represent the typical Italian company, highly innovative and derived by the investment of a single person or family.

The company had a long history of success and innovation throughout Europe. The company started with wood burning cookers and became the leader of refrigerators and washing machines. Their expansion plan included offices in Paris and Spain. The Italian Company soon became a perfect example of vertically integrated manufacturer, which had total control of their activities, from production to final sales. The main problem of Zanussi was its strict dependence on their president, who accidentally died in an airplane crash. Zanussi was a very centralized firm. To this situation you have to add the bad diversification program that the company was implementing from a while. This resulted to be costly and to add to the company many unprofitable businesses, from televisions to coffee makers.

2) As Leif Johansson, would you have recommended the Zanussi acquisition in 1983?

Yes. Zanussi went into many unrelated businesses and neglected its core business. As a result their diversified businesses incurred heavy losses. In 1982 the company had debts amounting to over Lit 1300 billion and was losing over Lit. 100 billion a year. Although its core businesses were profitable the losses of the other business units were simply too high. Another major concern was the unprofitable Spanish appliance company IBELSA, which was owned by Zanussi. The Italian company had received subsidies from the Spanish government and in case of a breach of their commitment to try to boost the Spanish industry, they would have incurred in heavy fines. Electrolux was also facing another problem with Zanussi. In fact, Zanussi's previous managing directors had sold equipment to a German company and then leased them back. Such transaction was illegal under Italian tax law. Electrolux wanted to buy shares in order to rescue Zanussi. Electrolux was able to integrate the new acquisition since it was a supplier as well as a distributor. Certainly, the acquisition of Zanussi gave Electrolux the opportunity to take control of the supplier and the distribution channel. Also, Electrolux could use Zanussi's products to expand its product lines as well as expand geographically. In fact, Electrolux had a large market share in Scandinavia where Zanussi was almost absent, while Zanussi had a large market share in Italy and Spain, where Electrolux was not very present. Zanussi was also strong in France. Finally, I have to reinstate my previous opinion: I would have definitely recommended Leif Johansson to acquire Zanussi.

3) What lessons, if any do you draw from Electrolux's approach to acquisition decision-making?

One lesson that can be learned from Electrolux's decision-making approach in acquiring Zanussi is that Electrolux always had a good, defined and planned strategy and very experienced managers. Electrolux had seemed to have clearly specified objectives and during the acquisition process its managers never left out the details, they did not cut corners and most important the company was always determined to complete the phase of integration in no more than six months. Also the philosophy of Electrolux was pretty peculiar and to put it in Anders Scharp words: “You never choose an acquisition, opportunities just come". Electrolux made a point that when acquiring a company that is in trouble they always evaluate the possibility if the other company can be rescued or not. Electrolux managers look at the other firm and study if the acquisition make sense and if it could be successful or not.

4) What lessons do you draw from Electrolux's approach to acquisition integration? What would you have done differently?

From this case a lot can be learnt about the acquisition integration approach. Zanussi had many commitments at the time of the acquisition. Therefore it was very important for Electrolux to find out what the possible risks, fines and penalties would be. One important factor was...
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Electrolux Acquiring Zanussi. EssayMania.com. Retrieved on 12 Oct, 2010 from