The Grundig Story
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Case Code: BSTR200 Case Length: 16 Pages Period: 1980-2005 Pub Date: 2006 Teaching Note: Not Available |
Price: Rs.300 Organization: Grundig AG Industry: Consumer Electronics Countries: Germany, United Kingdom Themes: Failure of Strategy, Bankruptcy |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
The Dutch Connection
Philips began its association with Grundig as early as 1976, when it entered into a technical collaboration with Grundig for the Video 2000 (V2000) - a home video recorder. The two companies carried out collaborative laboratory work from 1976 till 1979, when the model was launched.
The V2000 collaboration continued till 1981. The initial public response to V2000 was positive. Experts in the field of electronics praised the superior technology of the V2000 format, and declared it to be superior to the VHS format launched by JVC and the Betamax format launched by Sony Corp. The V2000 had unique features including extended recording time and the facility to add extra commentaries without erasing the existing audio track. However, the success of the V2000 was short-lived. Eventually, the VHS format became the prevailing standard in the significant markets of Europe. Marketers identified several reasons for the failure of the V2000. First was the fact that Grundig and Philips were latecomers to the VCR market...
Financial Mess and Insolvency
In the period between 1997 and 2000, Grundig was under the control of banks and investors who financed its operations. But all through the period, the company was teetering close to bankruptcy.
When Philips severed its ties with Grundig, the arrangement included a clause which barred Grundig from entering the Asian markets. Asia, with its emerging markets like India, China, etc had become attractive and most electronic companies were targeting them to improve their top lines. The market for electronics in Europe was close to saturation whereas the US market was dominated by established players which didn't provide Grundig with many alternatives.
However, Grundig evaded the Asian ban by entering India in 1997 through license agreements. But the company didn't make much of a dent on BPL or Videocon, the then market leaders in India...
The New Owners
In July 2003, the district court of Nuremberg declared Grundig insolvent and initiated the insolvency procedure. Beck, who had earlier been chosen as the temporary insolvency administrator, was now appointed as the insolvency manager. It was announced that the profitable sections of the company such as its car radio, dictating machines etc would be sold to individual investors. The court also announced that there were prospective buyers even for the loss-making sections of Grundig...
ALBA
Alba Plc. (Alba), a UK based company was formed in 1963, and was originally called Harris Overseas Ltd. The company started operations in 1964 by sourcing products from Japan and Hong Kong. It established its headquarters in Barking, Essex, UK in 1970. In 1982, the company was renamed Harvard International Ltd. In the same year, the company acquired Alba Radio, a marketer of radios and other electronic products. In 1987, the company changed its name to Alba Plc. and was listed on the London Stock Exchange...
BEKO
Beko Electronik A.Þ (Beko) was founded by Vehbi Koc, in September 1966 in Istanbul, Turkey under the name of Bekoteknik Sanayi A.Þ. It was renamed in 1996. Over the years, Beko has grown to become one of the largest manufacturers and marketers of TV sets, DVD players, cash registers, satellite receivers, etc. in Europe.
In the early years of its growth, the company acted essentially as a supplier to other electronics majors. In the 2000s, the company intensified its efforts to popularize its Beko brand. It began to sell Beko branded TV sets and other electronic products in several countries in Europe and Africa. The brand was a market leader in countries like Botswana and Ivory Coast. In Europe too, the company has seen a steady increase in its exports. In all, the company was exporting its products to over 100 countries in the world. With a 125,000 sq meters modern facility at Beylikduzu in Istanbul, Turkey, Beko was widely considered a cost-effective manufacturer of electronic products...
Outlook
Alba reported that for the eleven-month period (May 01, 2004 - March 31, 2005), since it jointly took over Grundig, the turnover for the German company was € 197.8 million and profits before tax were € 3 million. Analysts were of the view that Alba's proven skills in logistics, product range planning, and marketing had made a measurable difference to the fortunes of Grundig, as evidenced by its profits. However, the consumer electronics market in Germany and the rest of Europe was gloomy...
Exhibits
Exhibit I: A Brief Note on Philips
Exhibit II: Sales Turnover of Grundig
Exhibit III: Alba's Brand Portfolio
Exhibit IV: The Award Winning LCD TV
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