The document discusses restructuring options for SKF Bearings to address declining profits. It notes increasing competition, stagnant culture, and overemphasis on manufacturing. Evaluation finds the bearing market is not homogeneous and specialty bearings have higher margins. It recommends separating into divisions for standard and specialty bearings. A new strategy is proposed for the auto-aftermarket focusing on service through more availability of products and retailers to increase sales margins in that segment. Restructuring and increased investment are needed to implement new strategic plans.

1. SKF Bearings
Submitted by Group B14

2. Should Malm accept the assignment?

3. Need for restructuring the
company
 Increasing top line but decreasing EBITA
and profit margins
 Other avenues of increasing profits have
been exhausted
 Cutting Workforce would lead to
employee unhappiness
 R&D cost cut will compromise
technological prowess
 Production rationalization has already
been done
 Company has a sluggish culture
 Growing competition from international
players
 Wrong orientation
 Excessive stress on Manufacturing
 Neglect of after markets area
0
0.5
1
1.5
2
2.5
1982 1983 1984 1985 1986
Net Income

4. Evaluation of the proposed restructuring
 Research showed that the Bearing market is not homogeneous
Thus it made sense to segment the market and restructure the
departments to meet this segmentation
 With growing competition, the standard bearing market has become
commoditized
This leads to lower profits margin
To increase margins, SKF needs to concentrate on specialty bearing
market
Hence the need for a separate division that concentrates on Specialty
Bearings
 Profit Margins are low for OEM sector, After market customers are
willing to pay more

5. Marketing Strategy
• Increase the sales of Auto-aftermarket
• Increase the sales margin (Data is not given
in the case)
Objective
• Sales of other bearings are constant
• The competition is more or less same
Assumption

6. Analysis
• High Quality Products
Company
• Not brand loyal
• Convenience matters: Speed, Availability,
Assistance
• Challenges of getting right product and
right tool at right time
Customer – Retailers
• Delinked
Consumers
• Auto manufacturers
• High Priced
Competitor
 Current Strategy
 Push Method
 Reverse supply chain
 Less prioritization given to
Auto-aftermarket because of
less share in sales
27%
32%
14%
27%
Sales Share
Machinery OEM
Automotive OEM
Machinery-Aftermarket
Auto-Aftermarket

7. Planning: 4 P  Product: The market is very fragmented. So
need to have longer breadth of product
portfolio.
Sell tools as well that can be useful to the
repairing centers.
 Price: Premium Pricing based the service
delivered.
 Place: More retailers. This would increase the
penetration and hence the convenience.
 Promotion: The products are of good quality.
So increasing trials can lead to increase in
sales. So good promotion can help SKF in this
regard.
• New Strategy
• Pull Method
• Cash the service
(convenience)
delivered
• Differentiating factor -
Service
• More retailer
• Shorten the Supply
chain – (This will
reduce the bullwhips’s
effect)

8. Planning
 Restructuring
 SKF tools and SKF Bearing Industry must make their products available to all retails/
repair centers such that there is no inconvenience bearing installation.
 Training and Incentives should be given to the retails and garages to give better service.
This requires good synergy among three departments
 Increasing the presence
 More products in the shelf
 More retails and garages
 Capital Expenditure
 Need to increase capital expenditure to perform the plans