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
"Grundig's wide product range gives it the potential to once again become one of the biggest brands in the European consumer electronics industry."
- Hubert Roth, Managing Director, Grundig in 2005.
"The transaction with Alba and Beko has set the stage for tying in the success of the past. Today the course for the future and the growth was set."
- Dr.Siegfried Beck, Insolvency administrator in April 2004.
Introduction
In April 2004, Alba Plc. (Alba), a UK based electronics group, and Beko Electronics SA (Beko), a Turkey based manufacturer and exporter of electronic products and parts, acquired joint control of Grundig AG (Grundig), the German electronics major which had been reeling under mounting losses.
Grundig had filed for bankruptcy in April 2003 and was undergoing insolvency administration. The Anglo-Turk 50:50 joint venture took control of the Home Intermedia Systems (HIS) division of Grundig, which was to be transferred to a new entity called Grundig Multimedia BV (GMB) with its headquarters in Amsterdam, The Netherlands. Grundig, established in 1945, was a revered name in its country of origin, Germany. It was one of the "architects" of Germany's post-war economic revival. The company, which was known for its high-tech radios and receivers, was a huge success till the mid 1970s. Sales began to decline in the late 1970s and in 1980, the company recorded a loss for the first time in its history.
In 1984, Royal Philips Electronics NV (Philips), the Dutch electronics major, took over the management of Grundig. However, Philips was unable to turn Grundig's fortunes around and severed its links with the ailing company in 1996-97. Stiff competition from the Japanese and the Korean players was seen as the major reason for Grundig's slide towards bankruptcy.
Though Grundig's range of products were technically and aesthetically superior, their high price was a major damper on sales. Grundig was also reluctant to shift its production base to low cost countries like China. A combination of low sales and increasing cost of production caused the eventual ruin of one of Germany's post-war corporate icons. Analysts said Alba and Beko, both known for their low cost operations, were a good team to rescue Grundig from its destructive downward spiral. Alba, with an array of brands was seen by industry experts to be strong in distribution and marketing. Beko, on the other hand, was one of the largest TV manufacturers in Europe and had strong operational strengths.
Together, they were seen as a force which could unleash the potential of the Grundig brand and ensure profitability too. The joint venture would try to capitalize on Grundig's proven R&D capabilities as well. The deal could save the Grundig brand and could continue to make available cutting-edge electronic products for which the Grundig brand was famed, even if under non-German ownership. The joint venture would also be likely to expand the brand's horizons beyond Europe.....
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