The Grundig Story

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Case Details:

Case Code : BSTR200
Case Length : 15 Pages
Pages Period : 1980-2005
Organization : Grundig AG
Pub Date : 2006
Teaching Note :Not Available
Countries : Germany, United Kingdom
Industry : Consumer Electronics

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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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...

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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... 

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