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.
[...] VSM was formerly known as a volume manufacturer of sewing machines, along with other established competitors such as Brother, Janome and Juki. The struggle between these manufacturers was fierce then, since the markets were almost undifferentiated, and the competition was cost-driven (the products were modestly priced sewing machines, made in outsourced low-cost facilities). Plus, innovation was very easily imitated by the competitors (for instance, when Janome introduced its touch-screen controls, the competitors reacted very fast to implement this standard into their production). [...]
[...] Control of the plants initially exploited by Pfaff, after acquisition by VSM of the latter, reveals a rationalization of the production Strategic relationships Lack of market information is a big problem that VSM faced. VSM Group managed to face globalization through different relationships. The new strategy involves changing the relation with the retailers because they are the part of the organization which deals with the final customer directly. VSM built exclusive Husqvarna Viking shops and exclusive Pfaff shops. Retailers were satisfied with these relationships as they were given bonuses depending on the volume of the sales. [...]
[...] This cooperation was put into effect with the third parties: sales companies, retailers, R&D department and marketing and sales department= NODS of the networking Configurational dilemmas After the acquisition of Pfaff by VSM, one of the configurational dilemmas was the fact that the VSM Group was in possession of two strong brands that partly competed for the same market space. In order to separate the two formers competitors and avoid cannibalization, the marketing departments built two very different images, associating different key words, colors and styles of person to each brand. [...]
[...] VSM aftermarket training in sewing techniques) to retailers provided a competence to VSM as many of them were willing to pay for it. Also, the acquisition of Pfaff in 2000 gave to VSM Group the opportunity to benefit from the Pfaff brand. It was indeed a deal breaker. With 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. [...]
[...] Threat of substitutes The substitution of traditional sewing machine by a new generation of computer incorporated sewing machines for embroideries: That's a substitution of need Competitive rivalry Competitive rivalry is relatively high. Many factors help us to understand that. First is the maturity of the market. This market is one of the oldest in the history of industrialization. In a mature market (in the West demand for sewing machines had been declining for more than 20 years), growth rates are not likely to be very high and companies can not expect to grow with the growth of the market but only by taking market shares from competitors. [...]
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