Electrolux Sees India, China As Growth Drivers  ( September '26,2003, FE)

Sweden-based $14 billion Electrolux sees India as a pillar for the company in the next 5-10 years. Addressing the annual Business Media Day in Huskarna, Hans Straberg, president and chief executive officer, AB Electrolux, said that the company sees both India and China as major growth drivers which can also serve as global hub for sourcing Electrolux products.

He also confirmed that a turnaround of the Rs 482 crore Electrolux Kelvinator Ltd (EKL), the India subsidiary, is on its way. He accepted that the Korean majors are trying to sweep the market through aggressive price cuts. “But we don’t have any ambition to grow too fast in India. We will not compromise on price but continue to give value to our customers” said Mr Straberg, indicating that EKL has no plans to be party to any price war.

Mr Straberg also said that India can play an important role in supplying components for the company’s global operations, along with others like Brazil and China. Johan Bygge, CEO, Electrolux Home Products International and senior executive vice president, AB Electrolux, said that both the Indian and Chinese home appliances market is growing at around 6 per cent and, therefore, these markets are going to be a major growth drivers for Electrolux as well.

He also said that EKL is expected to turnaround by 2005 and the company has a range of products lined up to be launched between 2004-05, which include both air conditioners and microwaves and the parent company is making substantial investments into this. He also indicated that India can also act a centre for research and development and software development for the group. Mr Bygge also said that some of the recent achievements of the company in India have been the appointment of a new CEO and CFO along with putting in place a new management team as well as completing the merger of three legal entities, which were proving to be cumbersome for the operations. All these have helped the compny achieve a stable and predictable financials.

He also stated that the company’s immediate priorities for Indian business lies in further strengthening of management, restructuring cost base, and improving control processes and product renewal. Electrolux’ global plan include transition from double branding, which it has with local companies in different countries, to a single brand, Electrolux. By 2007, the company wants to have 60 per cent of its products under the unified brand, Electrolux. For further brand building it also appointed a new and one common advertisement agency for North Amercica and Europe.

While the global ad spend is roughly 1 per cent, which is expected to grow to 1.5 pe cent this year, for the emerging markets like India it is around 4 per cent. However, MR Bygge said that administrative costs in India are higher than in China and bureaucratic hurdles, despite improvement, continue to be a problem. All this puts India under a cost disadvantage vis-a-vis China.