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The VSM Group: Company analysis

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  1. Environment analysis
  2. Strategic Capability
  3. Strategic Choices
    1. Bases of competition
    2. Achieving competitive advantage
    3. Detailed choices
  4. Organizing for success
    1. Structural type and control processes & strategic relationships
    2. Configurational dilemmas

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?. [...]

[...] Bargaining power of suppliers: The VSM Group manufactures products with its own brand, but it had changed its parts suppliers for brands from Europe to the Far East due to the price competition. It has cut costs down to meet the competition; as a result of this it has increased the suppliers' power. However, the switching cost is high due to these products being specialized; and so the suppliers' bargaining power is moderate. Bargaining power of buyers: Within the sewing machine industry, the VSM Group is a global leader that dominates the American and European markets. [...]

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