Being able to recognize the correct time for when a shift is needed in a company’s strategy requires vision and experience. To shift one’s focus means to abandon previous ways of executing tasks and coming up with innovative ways of carrying out new ideas. Viking Sewing Machines AB, with the help of a newly introduced CEO, managed to shift its focus from “a trader of sewing machines to a customer-oriented marketing organization. ” (Danlqvist & Melander; 2001, p.745 of Johnson and Scholes)
Within a matter of five years, Viking was to completely change its corporate strategy, and their main success in doing so was the willingness of their entering management team to carry out a complete transformation and the fact that they were able to keep both the customers and their dealers satisfied. Viking had a change in its top management following its acquisition by Industri Kapital. The previous CEO, Ji?? rgen Johansson resigned, and the position was offered to Svante Runnquist of Volvo.
A large portion of the change in Viking’s strategy came from the change of CEO. At Volvo, Runnquist had an extensive marketing background that was essential for the type of job he was performing in the automobile industry. Bringing his knowledge into his new work environment was to bring new and innovative changes into the company. With Runnquist as new CEO of Viking, there was a clear attempt at improving customer relations in order to achieve their desired market share. Previously, Viking had only dedicated itself to manufacturing and selling standard sewing machines for household use.
(Danlqvist & Melander; 2001) As soon as Runnquist was officially instated as CEO, his marketing background became evident. He began by organizing an off-site workshop in order to completely renew the company strategy. In this workshop, the strategy document was fully revised, and it was then presented to middle management so as to inform them of the changes that were taking place. As opposed to the previous management, employees had the opportunity of involvement in company matters by being briefed on what top management was discussing almost immediately after it was discussed.
As well as this, the top management team incorporated the marketing vice-president, and the managers of the major sales companies, which reinforced Runnquist’s desire to work closely alongside, and in conjunction with, marketing executives. A new mission statement was drafted during this off-site workshop that was to reflect what Viking Sewing Machines AB was to become. As the case points out, “the strategy document was often referred to for guidance on operational matters and the mission statement was frequently promoted in the company’s public relations. ” (Danlqvist & Melander; 2001, p.739 of Johnson and Scholes)
The new mission statement is very representative of what Runnquist had in mind when he signed up to lead Viking. It reads: Before its management reorganization, Viking’s primary concern was to sell its machines. The way they distributed their machines was by means of dealers, who were the link between the company and the customer. Viking, therefore, never had much direct contact with the end consumer as the dealer was merely an intermediary. Husqvarna seemed to be content with this method of doing business until Runnquist was hired.
They had been relying on their European dealers for exclusivity, however, and differentiation was needed. It was not sufficient barely to be one brand among others in the shops. Runnquist saw potential in having “Dealer Partnerships” which “extended support for business development to encourage dealers to carry the Viking product line exclusively. ” (Danlqvist & Melander; 2001, p. 740 of Johnson and Scholes) He recognized that they had only been an exclusive brand in Sweden, but saw potential in the United States. As Runnquist stated “The US is our biggest market (with about 45 per cent of the turnover. )”.
(Danlqvist & Melander; 2001, p.740 of Johnson and Scholes) Runnquist paid increased attention to America, in part because they where proving to be an important market, and in part because he knew that it could be expanded. Establishing exclusive dealerships with Jo-Ann Fabrics & Crafts, a store dedicated solely to the sale of craft materials, meant that they where aiming towards a particular market segment – one that was keen on sewing. Viking was aiming for a strategy of focused differentiation, which Johnson and Scholes (2002) define as “a strategy that seeks to provide high perceived value justifying a substantial price premium, usually to a selected market segment.
” (Johnson and Scholes, 2002: p. 328) Viking was strategically aiming at obtaining a response by an economically able sector of the population, with enough purchasing power parity to spend at specialized stores such as this one. They where aiming at attracting a more select consumer base than before, one that enjoyed sewing and that would be appeal to the idea of having extra features that could be incorporated into the activity. Runnquist followed this market strategy intelligently, because one thing is to target a particular segment, but specifically recognizing their needs was the basis of the strategy.
In Europe, Viking had more of a struggle. Exclusive dealerships were inexistent, so differentiation was even more of a challenge. Even though it is not implied in the case by Dahlqvist and Melander, it can be inferred that their European sales relied heavily in their domestic market. The reason for this is that Runnquist states “Our organization in the USA is particularly successful. Over there, people willingly pay 5-600 dollars to be in on a three-day course with a sewing expert. ” (Johnson and Scholes, 2002: p.740)
This can only mean two things, either Runnquist is hinting at the naiveness of the American consumers, which seems as a highly unlikely scenario given the fact that he previously recognized that they were the company’s largest market; or, he is referring to the lack of enthusiasm, and ultimately sales, in European customers for ‘after-market’ services. Regardless, Viking expanded its ‘after-market’ services to include “training in sewing techniques, software for embroidery construction and ready-made embroidery patterns, as well as spare parts and auxiliary sewing equipment.
” (Danlqvist & Melander; 2001, p. 740 of Johnson and Scholes) Currently, on their website, with the purchase of embroidery software, they offer one year of free, downloadable upgrades, an added incentive to the consumer. As the change became evident from being concentrated on technical features to becoming more interested in customer satisfaction, new technologies where being developed in IT related areas. As the case states, “the marketing and the technical development department moved into the same office building in January 2000.
” (Danlqvist & Melander; 2001, p. 741 of Johnson and Scholes) Before Runnquist, production and technical development departments where placed together, which was evident in the way Husqvarna conducted business, “programs in R&D during the 1980s mainly focused on streamlining production efficiency. ” (Danlqvist & Melander; 2001, p. 741 of Johnson and Scholes) Having both departments working simultaneously meant that customer value was going to be taken more seriously.
As well as this, Runnquist was concerned at the thought of insufficient market information. Under Volvo, market information had always been available to him, making it easier to study the market and possibly anticipate new trends or tendencies. If there is little or inexistent market information, the breach for learning about close competitors is extremely narrow. As Johnson and Scholes (2002) state, “collaboration between organizations may be a crucial ingredient in achieving advantage or avoiding competition. ” (Johnson and Scholes, 2002: p.339)
All the major sewing companies participated in exchanging information to better grasp the market situation. Also, the Research & Development department began comparing their machines to competitor ones. With this, “Viking collected information on competition through the sales companies and dealers. ” (Danlqvist & Melander; 2001, p. 741 of Johnson and Scholes) As a result, Viking began looking closely at its strongest competitors, some of which came from Japan; and Bernina, a Swiss company which was to become an important benchmark.
If Viking wanted to supersede Bernina and Japanese competition, it had to be able to build and manage new connections between resources and competences. It had to maximize its strengths as a way for them to obtain differentiation. Having shifted from a product oriented company to a marketing one enabled them to specifically locate and capture the target group they were after, one which included people with a certain economic status and idle time to spend perfecting their hobby.
Viking could even go as far as applying a niche strategy to this sector. The more Viking specializes towards this market segment, the easier it will see the value of its services because they are being targeted in a unique manner. A customer will realize when a company is utilizing all of its efforts to satisfy them, and this will result in an increased relationship with the company.