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”3000 at Facit
have to be fired”
The Swedish
company Facit
collapsed when
   electronic
  calculators
disrupted their
  mechanical
   products.
The example is
   often used in
order to illustrate
 how successful
   firms can go
under rapidly due
to a technological
 ...
This description should be regarded as accurate.
… However, it should be pointed out that the
company started to encounter problems long before
    the electronic revoluti...
It is true that all
 curves had been
 pointing upwards
during the 1960s…
”Company turnover
 above 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 profitability
declined during the 1960s, before electronics
        became a significan...
One important reason
   for this is the
     increased
    competition.
Sweden had stayed
  outside the second
 world war and could
 benefit 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
     ...
A larger organisation implies an increased
     complexity, more structures, more
bureaucracy and less control of the busi...
ys
”Facit enters Mexico.”
The Mexican
expansion became
a failure since Facit
  could not handle
 the labour market
     regulations
properly. Facit ...
”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 u...
”Addo becomes a part of Facit
but keeps its sales organisation.”
The acquisition of Addo
became 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 had
 reached above 1 Bn, this had happened at the
        expense of Facit’s...
The international expansion turned out to be much
     more difficult than had been anticipated.
It is not the same thing to manufacture
  calculators in Sweden as in Mexico.
Companies which ignore this fact and enter
’emerging markets’ usually get into trouble.
The integration of acquired companies does usually
  not 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 can
 be thought of
      as an
 illustration of
how difficult it
is to grow and
maintain good
     profits.
A quick
  geographical
expansion results
 in an increased
 complexity and
   less control.
… which in the long
run creates a lower
   profitability.
To all shareholders:

When top management speaks about acquisitions,
synergies, global expansion and emerging markets
    ...
Thanks to ’Brukskultur Åtvidaberg’ och the
municipal government of Åtvidaberg. The Facit
        archive is a fantastic so...
Christian Sandström is a
                PhD student at Chalmers
               University of Technology in
              ...
Facit, Expansion, Complexity And Growth
Facit, Expansion, Complexity And Growth
Facit, Expansion, Complexity And Growth
Facit, Expansion, Complexity And Growth
Facit, Expansion, Complexity And Growth
Facit, Expansion, Complexity And Growth
Facit, Expansion, Complexity And Growth
Facit, Expansion, Complexity And Growth
Facit, Expansion, Complexity And Growth
Facit, Expansion, Complexity And Growth
Facit, Expansion, Complexity And Growth
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Facit, Expansion, Complexity And Growth

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How expansion creates complexity and why shareholders should watch out when CEOs speak about emerging markets.

Published in: Business, Technology, Education
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Facit, Expansion, Complexity And Growth

  1. 1. ”3000 at Facit have to be fired”
  2. 2. The Swedish company Facit collapsed when electronic calculators disrupted their mechanical products.
  3. 3. The example is often used in order to illustrate how successful firms can go under rapidly due to a technological shift.
  4. 4. This description should be regarded as accurate.
  5. 5. … However, it should be pointed out that the company started to encounter problems long before the electronic revolution destroyed Facit.
  6. 6. It is true that all curves had been pointing upwards during the 1960s…
  7. 7. ”Company turnover above 1 billion.”
  8. 8. The acquisition of Addo was one reason for this (the leap in 1965-66 below).
  9. 9. One should also bear in mind that the inflation rates were very high in the 1960s.
  10. 10. However, all different measures of profitability declined during the 1960s, before electronics became a significant threat.
  11. 11. One important reason for this is the increased competition.
  12. 12. Sweden had stayed outside the second world war and could benefit largely from this during 1945-1960.
  13. 13. A huge demand and a low supply in those years had given Facit a fantastic position.
  14. 14. But over time, competition became much tougher.
  15. 15. However, an important reason for the declining profitability also seemed to be the aggressive expansion that Facit undertook in the 1960s.
  16. 16. A larger organisation implies an increased complexity, more structures, more bureaucracy and less control of the business.
  17. 17. ys
  18. 18. ”Facit enters Mexico.”
  19. 19. The Mexican expansion became a failure since Facit could not handle the labour market regulations properly. Facit lost millions here every year.
  20. 20. ”Facit enters India.”
  21. 21. … India…
  22. 22. … did not become a success either.
  23. 23. ”Facit and Odhner get a common sales organisation.”
  24. 24. 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.
  25. 25. ”Addo becomes a part of Facit but keeps its sales organisation.”
  26. 26. The acquisition of Addo became a failure for several reasons…
  27. 27. Facit also built new sites around Sweden…
  28. 28. … In Stockholm…
  29. 29. In Åtvidaberg a new site was built.
  30. 30. The Strömstad site expanded.
  31. 31. When it was stated later on that the turnover had reached above 1 Bn, this had happened at the expense of Facit’s profitability.
  32. 32. The international expansion turned out to be much more difficult than had been anticipated.
  33. 33. It is not the same thing to manufacture calculators in Sweden as in Mexico.
  34. 34. Companies which ignore this fact and enter ’emerging markets’ usually get into trouble.
  35. 35. The integration of acquired companies does usually not end up in the way that was intended either.
  36. 36. Detta bör absolut inte betraktas som orsaken till Facits slutgiltiga fall…
  37. 37. … The reason why Facit collapsed should be spelled electronics.
  38. 38. This slideshow can be thought of as an illustration of how difficult it is to grow and maintain good profits.
  39. 39. A quick geographical expansion results in an increased complexity and less control.
  40. 40. … which in the long run creates a lower profitability.
  41. 41. To all shareholders: When top management speaks about acquisitions, synergies, global expansion and emerging markets – start to glance at the sell button.
  42. 42. Thanks to ’Brukskultur Åtvidaberg’ och the municipal government of Åtvidaberg. The Facit archive is a fantastic source.
  43. 43. 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.org christian.sandstrom at chalmers.se

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