Facit, Expansion, Complexity And Growth
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Transcript of Facit, Expansion, Complexity And Growth
”3000 at Facit have to be fired”
The Swedish company Facit collapsed when
electroniccalculators
disrupted theirmechanicalproducts.
The example is often used in
order to illustratehow successful
firms can go under rapidly dueto a technological
shift.
This description should be regarded as accurate.
… However, it should be pointed out that the company started to encounter problems long before
the electronic revolution destroyed Facit.
It is true that all curves had beenpointing upwards
during the 1960s…
”Company turnoverabove 1 billion.”
The acquisition of Addo was one reason for this (the leap in 1965-66 below).
One should also bear in mind that the inflation rates were very high in the 1960s.
However, all different measures of profitabilitydeclined during the 1960s, before electronics
became a significant threat.
One important reasonfor this is the
increasedcompetition.
Sweden had stayedoutside the secondworld war and couldbenefit largely from
this during 1945-1960.
A huge demand and a low supply in those
years had given Facit a fantastic position.
But over time, competition became
much tougher.
However, an important reason for the declining profitability also seemed to be
the aggressive expansion that Facit undertook in the 1960s.
A larger organisation implies an increasedcomplexity, more structures, more
bureaucracy and less control of the business.
ys
”Facit enters Mexico.”
The Mexicanexpansion becamea failure since Facit
could not handlethe labour market
regulationsproperly. Facit lostmillions here every
year.
”Facit enters India.”
… India…
… did not become a success either.
”Facit and Odhner get a common sales organisation.”
Odhner had been a part of the Facit group since the mid 1940s. The integration of the two companies did
not take place until 20 years later! This was not strange at all back in those days.
”Addo becomes a part of Facit but keeps its sales organisation.”
The acquisition of Addobecame a failure for several
reasons…
Facit also built new sites around Sweden…
… In Stockholm…
In Åtvidaberg a new site was built.
The Strömstad site expanded.
When it was stated later on that the turnover hadreached above 1 Bn, this had happened at the
expense of Facit’s profitability.
The international expansion turned out to be muchmore difficult than had been anticipated.
It is not the same thing to manufacturecalculators in Sweden as in Mexico.
Companies which ignore this fact and enter’emerging markets’ usually get into trouble.
The integration of acquired companies does usuallynot end up in the way that was intended either.
Detta bör absolut inte betraktas som orsaken till Facits slutgiltiga fall…
… The reason why Facit collapsed should be spelled electronics.
This slideshow canbe thought of
as an illustration of how difficult it is to grow and maintain good
profits.
A quickgeographical
expansion resultsin an increasedcomplexity and
less control.
… which in the longrun creates a lower
profitability.
To all shareholders:
When top management speaks about acquisitions, synergies, global expansion and emerging markets
– start to glance at the sell button.
Thanks to ’Brukskultur Åtvidaberg’ och the municipal government of Åtvidaberg. The Facit
archive is a fantastic source.
Christian Sandström is a PhD student at Chalmers
University of Technology in Gothenburg, Sweden. He writes and speaks about disruptive innovation and
technological change.
www.christiansandstrom.orgchristian.sandstrom at chalmers.se