It's
easy to mistake Hans Straberg for
an American. The occasional burst of aggression and the candour
are not qualities associated with stern and formal European CEOs.
But when you are running the world's biggest consumer appliances
company (the Stockholm-based AB Electrolux raked in $17 billion
in revenues last year), aggression is not just desirable, but required.
For instance, Straberg, who manages businesses across 150 countries,
must keep an eye on both brand competition from Whirlpool and General
Electric and cost competition from others such as Haier of China.
It's tough work and "not always very pleasant" says a
candid Straberg. On his maiden visit to India after taking over
as CEO in April 2002, the 47-year-old Straberg, in between taking
stock of his still-ailing Indian subsidiary and announcing a $300-million
outsourcing deal, met with BT's Shailesh
Dobhal and Sushma Subramanian to
talk about Electrolux's plans for India and elsewhere. Excerpts
from an exclusive interview:
Your predecessor, Michael Treschow (now
Chairman) was known as Mike the Knife, because of his focus on cost-cutting.
How would you like to be remembered?
I would like to be remembered for being the
CEO who, along with the Electrolux team, built the Electrolux brand
into the leading global appliance brand.
How do you plan to do that?
Through products that are developed based on
consumer insight marketed under the Electrolux brand and then delivered
and sold to the consumers at a very efficient cost. And when I talk
about products developed based on consumer insight, that's what
is the basis of Electrolux. We, as Electrolux, don't ask consumers
to be engineers. We do consumer interviews. We study trends. We
ask consumers what problems and desires they have, and then we innovate.
There is some concern that the company (internationally)
has too many brands. What's your view on this?
Well, we have set 2007 as a target to have two-thirds
of our sales on the Electrolux brand. And we're well underway. We
don't take away brands. We build Electrolux as our global brand
and also build on the strong local brands.
If you promote one brand, doesn't another
one get pushed down? Like it happened with Kelvinator in India.
You almost phased it out here.
That has to do with the situation that Kelvinator
is known for a certain type of product. And now we're trying to
go in for a wider product range. Electrolux is a brand that has
a very good (wide) connotation, and therefore, we take that advantage
to build Electrolux. Otherwise we would have had to introduce Kelvinator
into new segments and reposition it, and it's not natural to do
that. And at the same time we're building Electrolux because that's
our global brand.
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"We
ask consumers what desires they have, and then we innovate" |
In the US market a few years ago there was
some talk of consolidation in the industry. Electrolux buying Maytag
etc. Is the sentiment very much the same today or has it changed?
Do you think consolidation will still happen internationally?
We are in such a position today that it probably
will be difficult because of anti-trust rules to buy one of the
big competitors. We today are interested in different areas to acquire
companies. We already have the size today that (consolidation) is
not going to determine our future.
But doesn't a lot of the growth in developed
markets, like the United States, depend on consolidation?
Well, if you look at our marketshares in the
US, in 1995 we had about 13 per cent. Today we have 23 per cent
without buying any companies. And there's still 77 per cent, isn't
it?
How do you view the threat from new entrants
like Haier?
First, I would like to say that we are very
much focused on the consumer. It's the consumer who pays our salaries.
So we need to fulfill their needs. At the same time, we are taking
this very seriously. We have been in business for 85 years, and
I have been 20 years with Electrolux, and this has been happening
all the time, whether it's Eastern Europe or Turkey, whether with
Koreans or Chinese (competition). It is not something we are panicking
about.
What are the areas of growth and concern
for Electrolux in India?
We were early in and at that time we saw the
world was going to globalise over time. That's why in many places
we went in the 1980s and the early 1990s. But we treated these different
markets quite separately. Today, globalisation is here. And we have
built a position where we can take advantage of this. In India we
have gone through a period of restructuring.
A very long one at that.
I admit, in hindsight, we probably should have
done things a bit differently. We have learned from this like we
have in many markets and we are now changing pace. I know we have
had a lot of negative press and I regret that, but we are taking
the necessary steps and as you can see, we did not bail out. We
are committed to the Indian market because I am a firm believer
in India. And I can tell you that belief was raised 10 times after
I met your President yesterday.
How was the meeting?
It was fantastic. It is one thing that I will
tell my grandchildren about. I was told that the meeting could last
between 10 minutes and 45 minutes, depending on the interest, and
it lasted close to an hour, and we discussed various issues. You
have a remarkable President. I am only the president of 80,000 people.
Here I met a legend who is the President of a nation of a billion
people. And he pulled the computer screen to me and started to present
his vision for India, and it was very interesting, and in a number
of things that he talks about are core values for Electrolux like
environmental consciousness and connecting people and businesses.
What is your impression of India?
I have been here several times, but this is
my first time as president of the company. I think India is now
moving very fast and only in five years time I see a lot of change.
Has growth in India been a disappointment
for you?
I think India is about ready to take off. When
more and more people can afford refrigerators and washing machines
and things like that, and then it begins to take off. I made a home
visit yesterday and this person was actually very satisfied with
our products.
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"I
think India is moving very fast and in five years I see a lot
of change'' |
Were there competing products in the home?
Yes, because we have not sold televisions or
microwaves before, but it was very interesting to hear the views
of a real consumer.
How long do you give your Indian company
to break even?
We have a plan that is working. We have stability
here, and the next thing is profitability. Management (Indian) is
confirming to me that at the very end of 2005 we will break the
waterline. We're also introducing new products here. The Indian
middle class' consumption pattern is changing. The mood is changing.
People see an opportunity to grow in the world. The newer generation
that has travelled and looks at products on the Internet, they see
it and they want to have it, too.
How important is India in your global strategy?
India is actually very important going forward
for us because of its growing market, very competitive market, but
not only as a market to sell products in, but also to utilise the
human resources in it, in the call centres and we see the industry
is becoming more and more competitive in providing components and
even finished products over time.
But you're sourcing (from India) only for
your professional outdoor division and not consumer durables?
The components are for outdoors products, and
we're looking at an opportunity for lawnmower engines and such,
but we are also looking to export, in a small scale, products out
of India, too. For our Indian operations and for any nation, you
have to earn the right to grow.
How big are your operations in China?
We have sales close to $250 million, but we
also source vacuum cleaners and small appliances from there.
What is the vision Indian Management gets
from you to achieve profitability?
To earn the right to grow, improve. If you ask
me for a marketshare target, I'll give you one and that is, more.
It's important to grow in India, and we want to grow. But marketshare
is one piece of the puzzle for us, because I could grow tremendously
just giving products away. Well, when the prices come down, we said
let someone else give away the product. In the end, if you're not
getting paid for the materials, no one can make money. If you think
you will be able to compete on low cost alone, then I'm not sure
you will be so successful.
There's a price erosion also happening in
this country. Do you see that affecting you?
This is not too bad for business. If you look
at flat screen TVS and CD players, where there is 50 per cent growth
in one or two years-this is good business. But it's a tough business,
and I think we can see it grow by continuing how we're doing.
How is that?
For the consumer, it's all about "me".
If we can become consumer-centric, then consumers feel that we understand
them and they can relate to what we give them, then they're prepared
to pay a premium for it.
How difficult is it to manage the labour/political
opposition to outsourcing?
We have to stay competitive, and today consumers
don't pay extra because the product is made in a certain place.
Of course, it puts a lot of strain on countries that lose manufacturing
to find new opportunities, and of course that is an issue, and it's
an issue of globalisation. I have the deepest feeling for people
who lose their jobs because jobs are moving. At the same time, consumers
expect prices to go down. And they are prepared to buy products
made with consumer insight.
How do you, as CEO, who has to make these
decisions, deal with it?
It is very tough. It's not always very pleasant,
but I'm employed by Electrolux, and if I don't make those decisions,
then I jeopardise the future of the company. When I do (make such
decisions), I do my best to explain to people in the company that
we have to cut costs. It's tough and it's a lot of work and then
when we go home and buy a new TV set we expect the price to have
come down. We are, in a way, our worst enemies. But at the same
time when prices come down, volumes have increased, new markets
have opened up. So it's a positive thing, but of course, it's tough
to explain to Mr. Smith in this place that you're losing your job
because of this. It's very tough. And I'm also a human being.
How do you feel about your competitors?
Whirlpool, for example, is in a better position than you are here?
India is not the only place where we have lots
of competition. I think about the consumer. I don't spend much time
thinking about the competition.
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