Vsm Sewing Machines Essay Example

some important external factors related to the VSM group are: Economic factor - The economy in which an organization operates is vital to its operation. The unawareness of how well the German-speaking economies in Europe were doing at the time of integrating Pfaff into the VSM group almost cost the group the loss of the entire market in this region. Due to the decline in demand for sewing machines in the west during the time of acquiring Pfaff, sales in these regions were at their lowest in Europe.

The VSM group faced a threat, but also had the opportunity to thrive and profit in the US due to the viability of its economy. The group effectively exploited this opportunity. When operating in any society, socio-cultural factors, such as societal attitudes and cultural values, play a significant role. This is particularly relevant considering the diverse cultures of the countries.

The VSM group's presence and operations in Czech, Germany, US, and the Far East, where it has acquired individual companies, play a significant role in its market growth. While this can be seen as a threat, it depends on how well the group leverages its knowledge of this factor to gain a competitive advantage. Regarding technological factors, the VSM group is at the forefront of innovation in hi-tech sewing machines and provides free online access to its operating systems. To maintain its leadership in this aspect, the group should continuously update the technological aspects of its machines in response to changes in technology. Additionally, the group should utilize its research and development expertise to explore new technological frontiers in the business.

This text discusses the potential impact of

external factors on the sewing machine industry. It emphasizes the importance of recognizing the level of competitiveness within this industry, using Michael Porter's Five Forces Model. Porter's model identifies five forces that determine industry attractiveness and long-term profitability: rivalry between existing competitors, the threat of new entrants, the threat of substitutes, the bargaining power of buyers, and the bargaining power of suppliers.

PORTER'S FIVE FORCE AND VSM GROUP

One specific area of concern is the threat to entry in the sewing machine industry. This includes factors that new entrants would need to overcome in order to effectively compete with VSM.

Some of these factors include: ? Capital requirement – VSM group is not only technologically well-positioned but also financially. They generated an operating cash flow of 235 million SEK during the case period. In order to effectively compete with VSM, a potential competitor in the same industry would need to invest more than VSM's operating cash flow into their value system. This not only establishes VSM as a prominent industry leader but also poses a threat to potential competitors trying to enter the market.

The VSM group has successfully gained access to a wide market in Europe and the US through various means. This includes acquiring major competitors such as Pfaff and the Zetina plant, as well as establishing in-store outlets in collaboration with a prominent US fabric retailer. This market access is a significant barrier for potential competitors looking to effectively compete with VSM. However, it also poses a threat to VSM, as the company has yet to develop a sales strategy for its European market, which accounts for 55% of its turnover. Without a solid strategy, VSM

may lose customers to rival companies operating in this market. Additionally, VSM has been able to maintain customer and supplier loyalty through initiatives such as the 'dealer-partner' scheme, bonus clearing system for internet sales, and free online software support. These value-added services have been provided consistently throughout the case period and contribute to the challenges faced by potential competitors aiming to compete with VSM.

B. Threat of substitutes: VSM has a strong presence in the sewing machine market with two major brands, Husqvarna Vikings and Pfaff. This allows customers to choose between the two brands when making a purchase.

The VSM Group faces competition from Brother, Janome, and Juki in the industry. These competitors have their own research and development facilities known for innovation and competitiveness. They are high-volume manufacturers focusing on low-cost production and technological advancements. VSM Group has increased its supply power by acquiring major players in the industry. Moreover, consumers' buying power has increased due to two major brand names in the market. Any new entrant or existing competitor must meet these criteria to effectively compete with VSM Group. Supplier strategies have also been employed, with Pfaff and Husqavarna switching to local and far east suppliers. This move has benefited Pfaff company by reducing costs by 50% on key parts and making significant improvements in quality and rejection rates.

According to Holland and Batiz-Lazo (2004), the Global Pharmaceutical Industry uses a specific strategy to gain a competitive advantage in the business environment. This strategy involves considering external factors such as socio-cultural aspects (e.g., identifying key markets like the EU, US, and Japan) as well as technology.

The text highlights the significance of a high innovative process

and investment in Research and Development (R&D) and Economic i.e. sales and marketing e. The company implemented the hiring of sales representatives to gain a competitive advantage in the global pharmaceutical industry. To assess the variables operating within an organization's environment, the SWOT analysis was conducted. This analysis examines both external and internal forces, which contribute to the overall strategic position of a business. It helps identify the business's strengths, weaknesses, opportunities, and threats.

Here, a SWOT analysis tool will be used to assess and summarize VSM's organizational position. Strengths: a) VSM Group has a strong historical reputation and specialized market presence. It has powerful brand awareness, specialized technologies for producing and developing household sewing machines, and extensive business experiences that enable VSM to thrive in this industry. VSM also holds the European patent rights for sintered metal technology, which allows for the production of enhanced products. Weaknesses: VSM's production is limited to household sewing machines, restricting its profit opportunities to the domestic segment and preventing expansion into the professional segment.

The lack of market transparency in the sewing machine industry would negatively impact VSM's business activities, particularly in terms of obtaining information about its competitors' actions and conducting market research. However, there are several opportunities for VSM to capitalize on. Firstly, the rapid development of technology can provide VSM with new competitive advantages by continually innovating and developing their products. Additionally, e-business presents a great opportunity for VSM to enhance their sales and financial profit by establishing effective communication channels with retailers, customers, suppliers, and the general public. Lastly, VSM may have an advantage over Brother, as Brother is not specialized in sewing machines and cannot

invest all their resources in developing and marketing sew machines.

There are several threats to VSM, a sewing machine company based in Europe. Firstly, the decline in demand for sewing machines in the western hemisphere has been detrimental to VSM's performance. Additionally, Japanese competitors with low-cost production facilities pose a significant threat to VSM in the price-sensitive market. Notably, Brother, one of these competitors, has been aggressively attacking VSM by producing innovative products at prices that undercut VSM by 20-30%. On the other hand, Bernina, another sewing machine company, can use its solid reputation and actively demonstrated Swiss heritage as a defensive weapon against VSM's aggression. Finally, the primary aggressive weapons for VSM in 1997 were technological development and product innovation.

The ability to keep pace with technological advancements and create competitive advantages is crucial for operators in this industry. However, an analysis of VSM's capabilities reveals that it does not surpass its competitors in areas such as technology advancements and internet usage. VSM's rivals, who have advanced PC-controlled machines and embroidery software, hold an advantage over VSM. Moreover, VSM lacks a significant cost advantage. Therefore, it can be concluded that in 1997, VSM faced challenges from its rivals who could offer lower prices, improved quality, and innovative features.

In terms of strategies for the future, VSM has made significant progress and is now in a stronger position compared to 1997. This can be seen both internally, with improvements in technology skills, human resources, and brand awareness, as well as externally, with competitors falling behind in product development. One way VSM has expanded its product range is through the acquisition of Pfaff, a renowned brand specializing in industrial

machines. By taking advantage of external opportunities and offering innovative products and services while maintaining cost-efficiency, VSM has enhanced its market orientation. Now that it has established a favorable market position, VSM needs to focus on determining the direction and approach for developing future strategies. The Ansoff Matrix offers four strategic choices to achieve growth objectives by matching existing and new products/services with existing and new markets. Under the guidance of a new CEO, VSM's focus has shifted towards improving market orientation rather than relying on cost advantages over manufacturers in the Far East. Instead, the company adopts a differentiation strategy to offer unique products and services for gaining a competitive edge.VSM implemented various strategies to recognize the significance of product uniqueness, improvements, and marketing-based approaches. By utilizing its creativity in product development and technology innovation, VSM successfully sustained its strategy by offering customers advanced products with innovative functions. An instance of this is the introduction of Designer I, a PC-controlled sewing machine that met the needs for convenience and high-technology sought after by customers. This not only fulfilled customer demands but also cultivated brand loyalty and safeguarded VSM's market position.

VSM collaborated with a software producer to create software for professional sewing machines that can be controlled by a PC. This innovation allowed customers to easily access and download embroidery patterns from the VSM website, enhancing their interest in using sewing machines. By investing in technology development, VSM improved their products and services to better meet customer needs. As a result, VSM successfully strengthened its market orientation and saw rapid growth in the after-market.

2. According to Bob De Wit and Ron Meyer (2004), corporate level

strategy involves selecting the best businesses and integrating them into the overall corporate structure. In the 1990s, VSM faced challenges and decided to diversify in order to protect its existing value and add more value to the business. Diversification is a strategy that involves moving away from current markets and products. In the case of VSM, diversification can be categorized into three types: forward integration, backward integration, and horizontal integration. Forward integration, also known as forward diversification, means that the business takes on activities further down the value chain (downstream) in the competitive arena.

(Paul Finlay, 2000) The organization desired to establish a closer relationship with its customers and gain direct insight into their needs after the new CEO arrived. Transforming retailers was identified as the key strategy to strengthen distribution advantages, offer unique services, and expand the international business in the US. The organization implemented the 'Dealer-Partners' program as a way to encourage retailers to exclusively carry the Husqvarna Viking product line and provide them with extended support for business development. Additionally, VSM partnered with Jo-Ann Fabrics & Crafts in the US to open exclusive Husqvarna Viking shops. The organization also aimed to expand the after-market by offering various services to retailers, such as sewing technique training, embroidery software, ready-made embroidery patterns, spare parts, and auxiliary sewing equipment.

In addition, with the rise of the internet, VSM began establishing web-shops to revolutionize distribution. This new way of distributing goods offers the advantages of being affordable, highly effective, and efficient, thus creating a competitive advantage in distribution. Backward integration is when a company takes control of activities upstream of its own competitive arena. (Paul Finlay,

2000) VSM implemented backward integration to enhance its supply system. To address cost issues at the German plant and improve cost-efficiency, VSM relocated production from Karlsruhe to the Huskvarna plant in Sweden. Consequently, VSM acquired the Zetina plant in Czech to handle the new responsibility of supplying raw materials and components. The Zetina plant proved to be cost-efficient, providing VSM with significant cost reductions of up to 50% on key parts and considerable improvements in quality and rejection rates.

In order to enhance the development of software for embroidery, VSM has acquired Embroidery Networks Ltd. This move has improved collaboration with software producers, resulting in superior products and services compared to competitors. Additionally, it has reduced costs associated with software suppliers. 3. 2. 3.

Horizontal integration is the process of one company acquiring another in the same line of business and merging the two together (Paul Finlay, 2000). In order to become a multi-business firm, VSM purchased Pfaff after it went bankrupt in 1999. As a result, VSM Group now had two strong brands, Husqvarna Viking and Pfaff, but this created a strategic conflict. The top management team at VSM had to implement a series of strategies to integrate Pfaff into the company. One important strategy was to differentiate the two brands in terms of their market offerings since they competed for the same market space.

HV's focus remained on the concept of 'family', whereas Pfaff identified their primary customer group as professional women. VSM took various measures to address the marketing and distribution shortcomings of Pfaff's manufacturing organization, such as lowering prices and cutting costs. These actions successfully resolved the strategic conflict between the two brands and

facilitated a seamless integration by combining the physical and human resources of HV and Pfaff. As a result, both Pfaff and HV benefited from these strategies and VSM Group gained a favorable position in the global market, generating significant profits for the organization.

Evaluation of Strategies After identifying the options available for VSM in 2003, it is necessary to evaluate the content and process of these strategy options. There are six main criteria that can be used to evaluate strategy options: consistency, suitability, feasibility, validity, business risks, and attractiveness to stakeholders. Consistency is especially important when it comes to aligning the strategies with VSM's mission and objectives. The mission statement of VSM clearly states that the main purpose of the company is to develop markets and become a leading premium company in the world. The strategies adopted by VSM are consistent with this mission by focusing on improving creative products and services and satisfying customer needs.

Suitability refers to being appropriate within the context of an organization's strategy, both internally and externally (Richard Lynch, 2006). VSM capitalized on technological and e-business opportunities in 1997 to address its weaknesses and establish its own strengths and competitive advantages. Additionally, VSM utilized its competences to expand into aftermarket and international markets. The options pursued by VSM were feasible, as it had ample internal resources and competence, including technical skills and software engineers to support its strategies. Furthermore, the availability of exclusive retailers outside the organization further facilitated its e-business activities.

The strategy options implemented by VSM demonstrated consistency, suitability, and feasibility, which are the three key success criteria that can enhance VSM's business performance and strategic position. These options offer

significant benefits to the organization in various aspects, ensuring long-term success in the sewing machine industry. Nonetheless, VSM also pursued certain strategies that were not sufficiently appropriate.

In terms of business-level strategy, VSM adopted a differentiated approach based on innovative product functions. However, technological advancements can be a double-edged sword, providing both advantages to VSM and presenting tough challenges from competitors. Thus, if VSM falls behind in product innovation, it risks giving competitors a significant advantage. Continuously leading the way in technology development allows VSM to prevail in competitive battles.

Therefore, in order to stay profitable, VSM should develop suitable strategies to create another competitive advantage instead of solely focusing on innovating products with advanced features. Furthermore, the corporate level strategy has also revealed its weaknesses due to the relocation of production from Germany to Sweden, resulting in incompatibility between two different engineering principles and high rejection rates. This situation necessitated significant re-engineering efforts for VSM. Additionally, Pfaff incurred significant losses, leading to liability and the loss of exclusive retailers.

This was clearly an error on VSM's part and they needed to address this unfavorable situation right away. Overall, the strategies used by VSM were largely valid and reasonable but still had some disadvantages. Therefore, in order to maintain a profitable position, VSM should continue to implement these effective strategies while also developing additional strategies to create competitive advantages, retain customers, and safeguard its market share and profits.