Strategic analysis of VSM (Viking Sewing Machines) group

In 1997, VSM AB became an independent company and had been bought by an investment fund Industri Kapital. This report analyzes the strategic impact of these events in a global competition and declining market background. In order to understand the VSM case, we have analyzed the new strategic capabilities acquired after the appointment of Mr Runnquist. Then we have focused on the strategic choices of the new CEO. Finally we have studied how VSM Group was organized for success. In addition to the three points, we have also drawn the PEST and the Five Forces models. Since VSM AB has been sold to Industri Kapital, Mr Runnquist changed the strategy of VSM AB completely. The first thing to do was to choose the strategic capability. Mr Runnquist developed new activities and processes through which unique resources were deployed in such a way as to achieve competitive advantage.

[...] VSM was formerly known as a volume manufacturer of sewing machines, along with other established competitors such as Brother, Janome and Juki. The struggle between these manufacturers was fierce then, since the markets were almost undifferentiated, and the competition was cost-driven (the products were modestly priced sewing machines, made in outsourced low-cost facilities). Plus, innovation was very easily imitated by the competitors (for instance, when Janome introduced its touch-screen controls, the competitors reacted very fast to implement this standard into their production). [...]

[...] Control of the plants initially exploited by Pfaff, after acquisition by VSM of the latter, reveals a rationalization of the production Strategic relationships Lack of market information is a big problem that VSM faced. VSM Group managed to face globalization through different relationships. The new strategy involves changing the relation with the retailers because they are the part of the organization which deals with the final customer directly. VSM built exclusive Husqvarna Viking shops and exclusive Pfaff shops. Retailers were satisfied with these relationships as they were given bonuses depending on the volume of the sales. [...]

[...] Svante Runnquist said that it was in order to have a growth of the after-market. In 2000, Industri Kapital decided to acquire Pfaff and the group was renamed VSM group with a new slogan: “changing the world of sewing”. There were two challenges. The first one was that the two brands of the group partly competed for the same market space: VSM group pulled the brands apart on other dimensions than price and quality, dedicated key words and colors for marketing each brand. [...]