VSM group has been developing, manufacturing and selling household sewing machines for more than 130 years after its first sewing machine was launched in 1872. It became an independent company after it was divested from Electrolux and acquired by the investment fund, Industri Kapital in 1997. With the arrival of the new CEO, Mr. Jorgen Johansson, the company carried out a series of polices to survive and develop in the new circumstances.
However, after a lot of strategic choices and changes, things are not so optimistic for the VSM Group, as a matter of fact the sewing machine market has kept declining in the past 20 years and the VSM group has encountered sharp competition from Asian manufacturers as well. In addition, the conflict between the VSM group and its two brands emerged.
The Porter's five forces framework helps to identify the sources of competition in an industry or sector. It has similarities with the PESTEL framework, but tends to focus on strategic business units rather than the whole organization. The Five forces framework looks at five key areas namely the threat of entry, buyers' power, suppliers' power, threat of substitutes, and competitive rivalry. It helps to understand both the competitive forces in the industry and the attractiveness of a new industry. The more powerful these forces are in an industry, the lower its attractiveness will become.
There are three main competitors which are all from Asia. Janome is the largest competitor by volume, and is specialised in domestic sewing machines and obtains several important industrial innovations. The second competitor is Brother, which is famous for office machinery, but it is also active in the sewing industry. Its innovative products' prices are lower than those of VSM as much as 20-30 percent. The third competitor is Juki which manufactures both domestic and industrial machines as well as computer-controlled machines, but it does less for products development.
[...] For example, VSM launched the Designer a new software-controlled model for sewing machines. At the same time, VSM has been “expanding the core products beyond the sewing machine”: new versions of the operating system, embroidery software and embroidery files can now be downloaded via VSM websites for free. Moreover, services such as training in sewing techniques are proposed to customers, and it is widely valued by them. All those changes have redefined the sewing machine industry, implementing new ways of customer support. [...]
[...] To be competitive in this market, VSM focuses more on the after-market and so, on the software market. In 1999, it acquired the British producer of software: Embroidery Networks Ldt. Moreover, in the period 2000 to 2003, VSM expanded the number of software engineers from 3 to 17. These investments show how important software technologies were for VSM and how it managed to stay highly competitive. In those conditions of fierce competition, collaboration is hard to conceive. However, as Runnquist explains when speaking about Bernina's decline: it needs other firms to “create demand for creative sewing”. [...]
[...] Companies have to differentiate their products and services to attract and create new customers in a saturated market Fortunately, one of competitive advantages of VSM was the production of special models produced in the Zetina plant which gives VSM a competitive edge over to its rivals. Competitive rivalry is high in this market. II. Strategic Capability Resources Competences Threshold Threshold resources Threshold competences capabilitie Manufacturing Cost efficiency / s plants and production economies of scale machines Product Human resources innovations Financial Product quality resources R&D Distribution channels Marketing Accounting information system Capabilitie Unique resources Core competences s for Dealer-Partners After-market competitive program services advantage Excellent IT Acquisition of a model small British producer of Software company software for PC-controlled Strong R&D professional sewing. [...]
[...] The VSM Group could not maintain these low prices, so it pushed its prices up. As a result of this, VSM had incurred losses for five years in the German market and market penetration was not achieved. The VSM effort has expanded in the US market successfully, but the question is whether it managed in the German market as successfully as in the US. Despite the VSM Group's ability to sustain a differentiation advantage, once the sewing machine market starts declining, growth will inevitably slow and competition will become increasingly intense. [...]
[...] The control processes also changed after the acquisition of Pfaff: the Zetina plant was an independent Czech company and the VSM team realized that controlling it was crucial to the production of Pfaff machines since the Husqvarna site could not produce even a fraction of the volume needed. Thus, the VSM group offered to buy the Czech company, along with taking over all the personnel, and hiring managers for the new company Configurational dilemmas As mentioned before, the VSM Group has faced some problems; therefore it should solve the problems in the future. [...]
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