Electrolux 2005 Annual Report Download - page 22
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Please find page 22 of the 2005 Electrolux annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Our accomplishments over the
past four years
Four years ago I took over as President and CEO of Electrolux.
My goal was to accelerate the development of Electrolux as
a market-driven company, based on greater understanding
of customer needs. At the same time, we would implement
restructuring in order to minimize production costs. We
would achieve this by:
• Continuing to cut costs and drive out complexity in all
aspects of operations
• Increasing the rate of product renewal based on con-
sumer insight
• Increasing our investment in marketing, and building the
Electrolux brand as the global leader in our industry.
Managing under-performers
We have divested or changed the business model for units
that could be considered as non-core operations or in which
profitability was too low. Instead of continuing production of
air-conditioners in the US, which was not profitable, we out-
sourced these products to a manufacturer in China. Our oper-
ations in motors and compressors have been divested. In
2005 we changed our business model in India.
Moving production to low-cost countries
Relocating production to low-cost countries is a vital part of
our efforts to improve the Group’s competitiveness. We have
shut down plants where costs were much too high, and
built new ones in countries with competitive cost levels. For
example, we moved production of refrigerators from Green-
ville in the US to Juarez in Mexico. This has enabled us to
cut costs and at the same time open a state-of-the-art pro-
duction unit for serving the entire North American market.
More efficient production and logistics
We have put a good deal of time and effort into making pro-
duction and logistics more efficient. This has involved
reducing the number of product platforms, increasing pro-
ductivity, reducing inventory levels and increasing delivery
accuracy.
More efficient purchasing
Purchasing is another area where we have implemented
changes in order to improve our cost position, mainly
through better coordination at the global level. We have
launched a project designed to drastically reduce the num-
ber of suppliers. We have also intensified our cooperation
with suppliers in order to cut the costs of components.
Intensified product renewal
In order to keep growing and improve our margins we must
increase the rate of product launches and innovations. Our
process for product development based on consumer
insight reduces the risk of incorrect investment decisions.
Achieving better impact in development of new products
has involved making global coordination more efficient,
which has given us a number of new global products. The
result of our investments in product development over the
past years is clearly reflected in the number of product
launches for core appliances, which rose from about 200 in
2002 to about 370 in 2005. Another indicator of our inten-
sive work on renewing the Group’s product offering and the
high rate of innovation is the increase in our investment in
product development, which has risen by SEK 500 million
over the past three years.
Access to competence
Over the past years we have established processes and
tools that ensure the Group of access to competence in the
future. Active leadership development, international career
opportunities and a result-oriented corporate culture enable
us to successfully develop our human resources.
Starting to build a strong global brand
When I took over as President and CEO in 2002 I stressed
that we had to prioritize building of the Electrolux brand,
both globally and across all product categories. A strong
brand enables a significant price premium in the market,
which leads to a sustainable long-term increase in margin.
Work on building a strong brand has been very comprehen-
sive. The share of products sold under the Electrolux brand
has risen from 16% of sales in 2002 to almost 50% in 2005.
Thanks to the efforts of the past years, we have an
improved foundation for the Group’s operations. In other
words, we are well equipped for the challenges that lie ahead.
Looking back