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
Themes : Failure of Strategy | Bankruptcy
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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"Grundig's wide product range gives it the potential to once again become one of the biggest brands in the European consumer electronics industry." 1

- 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." 2

- Dr.Siegfried Beck, Insolvency administrator3 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.

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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.

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1] "A clear strategy for growth," www.grundig.com.

2] Case No: COMP/M.3381-ALBA/BEKO/GRUNDIG, www.europa.eu.int, April 29, 2004.

3] On April 14, 2003 the Nuremberg local court selected Dr.Siegfried Beck (Beck & Partners) as the insolvency administrator or liquidator of Grundig AG.

 

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