Dr. Kim and Prof. Khan
Minot State University
Minot, North Dakota
Spring Semester, 2003
Swedish Organizational Culture
Culture is defined as a society’s accepted basis for responding to external and
internal events, these may include geography, history, religion, and language. Culture is
not inherent it is a social legacy. Culture is learned through observing behaviors of others
in society their language, knowledge, emotions, and ideas. This cultural pattern is then
built on, used, and passed to subsequent generations. Organizations also adopt a
corporate culture that affects operations, production, sales, and management style.
Societal and business cultures change and new methods are added as the society and the
firm adapt to external changes.
Swedes are always very punctual and expect their counterparts to do likewise.
When Swedes conduct business they use last names and appropriate titles, English is the
business language spoken in Sweden especially during presentations, all presentations
must be backed by facts and references. Swedes are harsh negotiators and are extremely
detailed. Appointments should be made two weeks in advance. Schedules and minutes
are clearly set for meetings, however, decisions maybe lengthy. Swedes do not exchange
gifts during business. It would be wrong to expect people to work over weekends,
holidays, or vacations, since these times are usually highly prized. Swedish
businesspeople, however, will take work home with them in the evening. Refrain from
scheduling meetings with Swedish businesspeople for the months of June, July, or
August, as well as late February through early March. These are very popular times when
Swedes go on holiday. The minimum vacation per year is five weeks.
Remember that there is a need to keep a low profile, and avoid anything showy or
status linked, means that even well paid senior executives do not necessarily dress any
more elaborately than average employees do. All Swedes typically dress well, but none
much better than others. This reflects the importance of maintaining a sense of equality in
this society. Scandinavians appreciate knowledge of the differences among the people of
Finland, Norway, Sweden, and Denmark. (www.executiveplanet.com)
Swedes respect someone who comes to them with established knowledge and
experience. The Swedes value consensus and avoid confrontation. The ability to be a
stable, functioning member of the team is key. Moreover, sincerity and seriousness,
rather than friendliness, are preferred attributes. Complimenting and rewarding
employees in public are usually not practiced. Generally, Swedes get right down to
business with little or no small talk. There is a critical emphasis on privacy and
individual accomplishment of one's tasks. There can, however, be much interaction
between senior management and staff, and within and among team members. Thoughtful,
quiet, and careful adherence to procedures is believed to be the most effective way of
accomplishing a task. Anything that is unusual or out of the ordinary are not appreciated
and should be explained. People and things need to be credible and substantial. The role
of the boss is to dispense information, provide guidance, and be the key decision-maker.
Subordinates are expected to provide detailed information and follow the decisions made
by their superiors. All parties are expected to work alongside each other as equals. The
hierarchy is usually quite accessible and there is a preferred air of informal respect
between superiors, staff, and workers. Decision-making falls to the lower levels of the
hierarchy in Sweden, where there is an emphasis on teamwork and compromise. In
many cases, they will turn over the power to make a decision to their middle managers,
who may even pass it over to lower levels. There is a definite hierarchy in Swedish
organizations. In many cases, however, the more senior managers will delegate to the
mid-level management structure.
Women make up approximately 48% of the Swedish work force (the highest
percentage in the world). Women and men are generally treated as equals in this country,
so expect decision-makers to be of either gender, and that all members of a team can be
involved in the decision making process. Businesswomen in Sweden whether foreign or
native born may pay the check at a business lunch or dinner without reservation.
Company Overview: Swedish Ball Bearing Manufacturer
The AB (Aktiebolegat) SKF Group is located in Goteborg; Sweden is the SKF
parent company. Engineer Sven Wingquist who invented the self-aligned ball bearing
founded SKF in 1907. On January 28, 2003 the Board of Directors of Aktiebolaget SKF
appointed Tom Johnstone as new President and Chief Executive Officer of SKF.
Johnstone assumed the position of president on April 15, 2003 as Sune Carlsson retired.
The parent company is organized into five divisions: Industrial, Automotive,
Electrical, Service, and Aero and Steel. Each of these divisions competes in and services
a global market, focusing on its specific customer segments. There are also five staff
units: Group Legal, Group Communication, Group Finance, Business Development and
Purchasing, Group Quality and Human Resources, and Group Technology Development.
The company owns 83 production sites in 24 countries, operates approximately 150
companies, and employees approximately 39,000 people.
The biggest challenge facing the company is ensuring that it focuses on
developing the businesses profitably and revenue generation. For this reason the SKF
Group’s president and its managers are also developing strategies that fit the corporate
culture, mission, and vision of the company. The creation of new products and product
line extension is a product strategy that is aimed at protecting the company’s viability in a
changing environment. SKF’s growth strategy is currently focused geographically on
India and also through strategic acquisitions and joint ventures. The SKF Group is
developing a cost reduction strategy due to the constant pressure for cost reduction from
all its customers.
The Explorer spherical ball bearing is the newest SKF Group development within
the ultra-low friction and high capacity products. The benefits of the Explorer include
the following: a high load rating that allows for the utilization of smaller machines that
consume less energy; enhanced service life for increased environmental benefits brought
on by reduced downtime and lower maintenance costs. Marketing this product along
with all of the SKF Group’s ball bearing products is extremely difficult except in industry
journals and periodicals because it is hard to market what one does not see. However, the
quality of the SKF roller bearing products sells themselves.
The SKF Group provides the following customer service package options to its
Data collectors to collect bearing vibration information from machines;
Maintenance software to analysis information from sensor units on the bearing
housing which relays the information to a central storage station;
Online monitoring system that measures performance at vast numbers of separate
points on machines. (Managing the Microworld, 1995)
The “@ptitude” industrial decision support system is a modular system that aids in
the improvement of machine efficiency by replacing labor-intensive data collection and
analysis with automatic analysis, fault resolution, and work order notification. This
system allows SKF’s customers to apply decision-making standards quickly and
consistently, based on meaningful data.
SKF logistics support provides global, customized and fully integrated supply chain
solutions. SKF Logistics Services can significantly reduce costs associated with
inventory, operations, distribution, and administration. The system also provides shorter
and more reliable delivery time and product availability.
SKF’s goal is to make things run better which explains its core business; the
production of self aligned ball bearings. The following are produced at a rate of 27,000
units per hour: ball bearings, roller bearings, magnetic bearings, slewing bearings, and
gas bearings. The smallest are less than a centimeter in diameter and the largest is 39 feet
in diameter. A ball bearing is exposed to extreme pressures and is protected by a layer of
oil 50 atoms thick. (www.skf.com) These pressures convert the lubricant into a soft firm
substance and back into liquid form. This lubricant is also produced by the SKF Group
and is an essential element of its core product.
One third of the SKF Group’s sales come from each of the following divisions
respectively automotive, aero steel, and electric. Although the Group maintains the
number one position in the manufacturing industry it has never possessed more than 20%
total market share since 1960, management does not expect this to change. Ninety-five
percent of all products produced by SKF in its home country of Sweden are exported.
SKF has demonstrated its commitment to sound environmental practice when it
was awarded ISO 14001 certification, the international standard for environmental
management systems, at the beginning of 1999. The most comprehensive of its kind,
SKF's environmental certification now covers more than 80 different manufacturing,
logistics and technical facilities in 22 countries on five continents. (www.skf.com)
Environmental issues are of extreme importance to SKF customers and partners, for this
reason a carefully formulated environmental program at SKF is giving it an important
competitive advantage. The term "environment" in this policy includes the external
environment and the internal working conditions as well as health and safety. Current
laws and regulations, and commitments to which SKF subscribes, are to be considered as
minimum requirements and conserves energy and natural resources. SKF’s
environmental performance will be continually improved according to this policy.
Environmental effects shall be taken into account when business decisions are made.
SKF companies shall strive towards a constructive communication with their local
communities as well as all environmental authorities concerned. Suppliers and sub-
contractors are required to adopt the principles of this policy. SKF companies will
continue to provide safe and attractive workplaces for all its employees and ensure that
the employees are sufficiently educated and trained to apply this policy in their daily
work. All SKF companies shall maintain long-term environmental plans, which shall be
continually adapted to developments, new discoveries, and experiences relating to the
environment. All SKF companies conduct regular assessments of compliance with this
policy. Environmental performance is measured and reported regularly to shareholders,
employees, and the public.
The SKF Group continues to maintain its long history of Quality Management
System. With few exceptions the Group’s 170 operating units have received ISO 9000
certification. SKF takes a preventative stance in regards to environmental hazards. In
1996 the Group set a goal to have environmental certification for the entire Group prior
to 1999. In 1998 the SKF Group became the first bearing manufacturer to acquire
approval according to ISO 14001 (international standard for environmental management
systems). (www.skf.com) This guarantees customers, shareholders, and other
stakeholders of SKF that the Group takes environmental responsibility seriously, which
allows customers to meet their obligations. Minimization of the impact that SKF’s
manufacturing operations on the land, air, and water is of utmost importance to the
Group. To this end SKF subscribed to the Business Charter for Sustainable Development
when it was issued by the International Chamber of Commerce in 1991. This charter
enforces strict rules that require all subscribers to conduct or support research and
development on the environmental effect of their operations and products.
The process of manufacturing bearings potentially produces by products that are
environmentally detrimental. The SKF Group product development department
developed a lubricant that was nicknamed “green” grease, which contains no lead. All
the other lubricants are being phased out of use in production in favor of this
environmentally safe substitute. The SKF Group is also making progress in decreasing
the amount of solid waste such as grinding swarf, which is traditionally disposed of in
landfills. SKF is currently conducting research to efforts to recycle swarf for use in steel,
ferrochrome melting, or cement manufacturing.
"The SKF Management Model" is based on the Malcolm Baldrige "National
Quality Award" criteria that have been altered to fit SKF environment and language. The
model is focused on how SKF has defined behavior leading to "Business Excellence".
The management of the SKF Group is based on a Total Quality Management (TQM)
strategy. This strategy affects employees, customers, and processes. Management has
identified all of the most essential business processes and has intensified work to improve
the quality. The involvement of employees has caused customer values to be increased.
The customer aspect of SKF is focused on relationship building and exceeding customer
expectations specifically in the development of new products and services. TQM
employee teams utilize the following problem solving system:
Employee management is a horizontal process and to ensure this an analysis of
the work climate within the Group being conducted in all units every 18 months. This
effort gives all employees opportunities to express their views on how the Company can
be improved. So as to maintain a continual learning environment SKF established the
Learning Centre in March 1998 so as to examine training and development activities at a
Group level. SKF managers believe that people are the only sustainable competitive
advantage SKF has and so it studies how best to develop its employees. The Learning
Centre also focuses on leadership development. The SKF College was started in 1987
and is located at SKF ERC, in Nieuwegein the Netherlands. The SKF College has always
concentrated on technical training programs. Both the SKF College and The Learning
Centre aim to offer training and development programs of a standard equal to or higher
than those offered outside of the company. Education is of utmost important to SKF,
especially research information gathered from MBA students. The company in turn takes
this information and uses it for market analysis purposes.
The management of processes at the SKF Group’s overall objective is to increase
focus on Customer Satisfaction and Business Results by managing operations in a cross
functional and process oriented manner. The purpose of the process is to ensure that SKF
is a more profitable company by cutting costs, increasing the speed and quality of work
processes, and to this end enable growth. Process work managers seek to facilitate and
create benchmarking and standardization.
The SKF Group management is based on a code of conduct that requires and
monitors responsibility in the following areas: customers, employees, shareholders, and
society. The code is based on the SKF Group’s core values: High Ethics, Empowerment,
Openness, and Teamwork. SKF also takes a strong position about conservation in
regards to the environment and uses its beliefs in environmental protectionism to dictate
how it performs its business. SKF’s manufacturing units, distribution units, technical and
engineering centers are approved to ISO 14001, the international standard for
environmental management. These units are included in a single Group-wide certificate,
which at the end of 2002 encompassed 82 SKF sites in 23 countries.
First Quarter Earnings and Performance 2003
Table 1. SKF Group Earnings
EBIT SEK 802 million
EPS SEK 4.94
Operating profit SEK 944 million
Operating margin 9%
Cash flow after investments and prior to SEK 47 million
Net profit SEK 562 million
Net sales Decreased by 1.2%
Currency effect –9.3%
Financial net SEK –142 million
Tangible assets SEK 304 million
Inventory 22.2% of annual sales
Equity/Asset ratio 41.2%
Return on capital 17.4%
Return on equity 16%
Profits before taxes SEK 160 million
Table 2. Earnings by Divisions
Divisions Operating Operating External Sales Total Sales
Industrial SEK 370 9.5% SEK 2,536 SEK 3, 890
million million million
Automotive SEK 174 4.6% SEK 3,441 SEK 3,812
million million million
Electrical SEK 80 million 4.7% SEK 502 SEK 1, 690
Service SEK 294 8.4% SEK 3,083 SEK 3,493
million million million
Aero and Steel SEK 47 million 2.8% SEK 971 SEK 1,681
In the Industrial division sales increased in Europe and Asia while sales in North
America remained unchanged, due to the expansion of the Explorer high performance
bearing with the incorporation of the spherical roller thrust bearing. The Automotive
division saw an increase in the sale of bearing and seal products to the car and light truck
industry in Europe and North America. Sales to the heavy truck and vehicle service
industries increased in Europe, but decreased in North America. In the Electrical division
were high in Asia and Europe, the Shanghai factory began production of ball bearings
and two development centers were established in Bangalore and India. The Service
division saw unchanged sales in Western Europe and significant decreases in North
America. Sales grew rapidly in Asia, Latin America, and Central and Eastern Europe.
The Reliability Services department continued to sign major product and service
contracts around the world, including customers in the mining industry in Australia, the
paper industry in Mexico, and the cement industry in Thailand. The Aero and Steel
industry acquired Ovako Steel and the former Steel division, however, sales were
decreased over all geographical areas. The first deliveries of composite rods from the
French subsidiary SARMA were made to the new airbus A380. Overall SKF Group sales
in Europe increased, remained the same in North America, and grew strongly in Asia as
compared to the same period last year. Manufacturing levels were higher than sales in
the first quarter but, will be adjusted accordingly.
The new CEO Tom Johnstone has set forth the following goals and objectives: a
target to maintain an operating margin at 10% and achieve SEK 10 billion additional
annual net sales by 2005/2006. To achieve this target the focus will be on increased
development of operational excellence, organizational growth and acquisitions. The
organizational growth should come from geographical expansion, fast growing customer
segments, aftermarket sales, service business, and new products. According to the CEO
acquisitions should contribute approximately 33% of the additional net sales.
2002-2003 Mergers, Acquisition, and Joint Venture Analysis
With the following acquisitions, SKF expands the number of ball-screw
manufacturing facilities to four: Turin, Italy; Chambery, France; Beaufort, France; and
Detroit in the United States. The acquisitions reflect the SKF Group's strategy to grow
through acquisitions and expand businesses with higher value added. An important part
of SKF’s growth strategy is to acquire specialist companies, primarily within the service
sector. The purpose is to add new technology, skilled personnel and a larger customer
base to the Group. SKF has acquired eight companies so far since last year with
combined annual sales of SEK 0.5 billion. Efforts to sell the Steel Division were
discontinued at the beginning of the year. SKF was unable to reach an acceptable solution
and are concentrating this year on raising the profit in our Swedish steel business.
February 15, 2002 the SKF Group acquired all shares of the US maintenance
engineering company Erin Engineering and Research Inc. Erin Engineering and
Research provides maintenance engineering services to the US power generation
and hydrocarbon processing industries.
April 8, 2002 a joint development venture was undertaken with Michelin and
Wabco a braking supplier for a tire-air management system, which will allow
drivers to change tire pressure even as the vehicle is moving. Production is
expected to be at capacity by 2006.
April 23, 2002 the SKF Group completed its acquisition of 75% of the shares in
British bearings maker NSK Aerospace Europe Ltd. The acquired company was
renamed Aeroengine Bearings UK it designs, manufactures and sells bearings for
May 2002 SKF acquired the bearing business of VMZ in Bulgaria its operations
consist of four bearing manufacturing factories. The new company was renamed
SBB (SKF Bearings Bulgaria) and is part of the SKF Electrical Division.
May 8, 2002 SKF and Goodyear formed a partnership the Power Transmission
Alliance, aimed at serving industrial clients in the potency transmission segment.
Goodyear produces belts and industrial hoses while SKF produces bearings and
May 2002 SKF and PBR Australia, part of the Pacifica Group Ltd., formed a
partnership to develop an electric version of PBR's parking brake, "Banksia."
This agreement brings together SKF's expertise in automotive mechatronics and
Smart Electro-Mechanical Actuating Unit functions and PBR's state-of-the-art
park-brake technology. PBR is the world's leading supplier of lightweight
aluminum and park-brake solutions for the automotive industry.
May 21, 2002 SKF acquired the Dutch company Delta Consult BV for an
undisclosed sum. Delta Consult, provides high-level life-cycle asset management,
maintenance engineering and operational services, as well as maintenance related
business process and information technology support. According to SKF the
acquisition would strengthen its Reliability Systems business.
July 1, 2002 SKF and Chrysler announce that all Pacifica 2004 models will
outfitted with SKF hub bearing units on both axles. Chrysler Pacifica will be
launched in 2003, as a 2004 model, and will have all-wheel drive capabilities
featuring the latest design of SKF's third generation hub bearing units. Chrysler's
all-new 2004 Pacifica, positioned as a sports tourer.
October 21, 2002 SKF and General Motors began a partnership to provide by-
wire technology so that GM will have a production-ready version of Hy-Wire
fuel cell car by 2010.
December 9, 2002 SKF announced the divestment of its Veenendaal plant, the
Netherlands to the US-based group NN Inc. as part of its strategy to divest non-
core component manufacturing operations.
January 10, 2003 the SKF Group acquired the US ground ball screws maker
Twentieth Century Machine Co (TCM) for an undisclosed sum. TCM became
part of and strengthened the SKF Linear Motion & Precision Technologies
Product and Brand Analysis
The following is a list of the products that are produced by the SKF Group:
Needle roller bearings
Angular contact ball bearings
Needle roller thrust bearings
Angular contact spherical plain bearings
Angular contact thrust ball bearings
Precision rail guides
Profile rail guides
Backing bearings for cluster mills
Radial spherical plain bearings
Ball and roller screws
Self-aligning ball bearings
Combined cylindrical roller/taper roller bearings
Combined needle roller bearings
Slides and positioning tables
Crossed taper roller bearings
Spherical plain thrust bearings
Cylindrical roller bearings
Spherical roller bearings
Cylindrical roller thrust bearings
Steels for corrosion-resistant bearings
Deep groove ball bearings
Steels for SKF rolling bearings
DynaSpin™ - Auto-Balancers
Steels for temperature resistant bearings
Fixed section bearings
Taper roller bearings
High temperature bearings
Taper roller thrust bearings
Hydrostatic shoe bearings
Indexing roller units
Thrust ball bearings
Toroidal roller bearings - CARB®
Linear ball bearings
Track runner bearings
Triple ring bearings
Multi-row radial ball bearings
The SKF standard product range encompasses more than 39,000 variants covering
all the principal bearing and seal types. The development of existing products and
innovations better meet customer requirements and are factors of vital importance to a
SKF’s ability to survive and grow. Accordingly, research and development activities
play an essential part at the SKF Group. SKF has concentrated its research and
development at its The SKF Engineering & Research Centre (ERC) in Nieuwegein, the
Netherlands. This center is equipped with product development and testing facilities as
well as manufacturing technology development centers. The SKF Group holds several
brands and trademarks that are recognized globally they are as follows:
SKF Vehicle Service
MRC Balls and
SARMA & AMPEP DynaSpin
CR & RFT Pilgrim
Ovako Steel DEI
Naiden Teknik AB ERIN
Research & Development
Circumstances under which the bearings operate become tougher, as customer
preferences and competitive pressures push engineers to maximize performance while
reducing size, weight and energy usage. As the world’s foremost manufacturer of roller
bearings and seals, research, development, and innovation are of utmost importance at the
SKF Group. Innovation occurs at every level of the company, among frontline workers
and top management. The desire to be to have a complete knowledge about bearings,
seals, and their usage more than any other company continues to make SKF the leader in
SKF Group aims to maintain a broad geographical presence and to always remain
in close contact with its customers. This is done through a highly developed network of
wholly owned manufacturing and sales companies and authorized distributors covering
approximately 150 countries in the world. SKF therefore, utilizes its R&D resources
with the markets it serves, which allow it to flexible and responsive to customer
requirements. A considerable amount of resources are allocated to technological
development each year. The more SKF Engineering and Research Center knows about
the ball bearings and seals the better SKF customers are equipped to maintain control
over their product and processes.
Research Programs are also held in conjunction with universities and institutions
such as the Imperial College of London, the Lulea Institution of Technology in Sweden,
and Chalmers University. The knowledge that is acquired within these programs is
channeled to SKF Nova, where new products are developed for the rest of the group.
International Product Divisions (IPD) then handles all the types of bearings new and
otherwise. Each division within the IPD takes responsibility for its products, process
specifications, development programs, and R&D goals.
More than 160 scientists, engineers, and support staff work at the Engineering &
Research Center (ERC), studying and determining the ways in which roller bearings and
seals are made and used. Professor Stathis Ioannides at the ERC has succeeded in giving
a more practical meaning to bearings called the SKF Life Theory. This theory assists in
developing and designing a bearing that lasts forever through utilizing high quality steel
and reduced dimensions to make a lighter bearing that can do the same job as heavy ones.
Due to the Life Theory SKF is producing bearings that are increasingly compact and long
lasting. Professor Ioannides says of the Life Theory, “As a result, previously
unpredictable behaviors and interactions can be approximated more accurately than ever”
(SKF Group, 1999). For SKF customers this means two things, a more reliable bearing
due to testing to improve and increase the duration of bearing life.
The right quality, quantities, and increased efficiency are three values that drive
production at SKF. The SKF Group continually strives to improve its production
processes through activities such as, total preventive maintenance (TPM), zero defects,
resetting, efficiency, and training. Specialized Technology Development Centers were
developed on the production floor to improve the efficiency of techniques utilized in soft
machining, heat treatment, hard machining, measuring, equipment, and computer
integrated manufacturing (CIM). Each center finds and develops techniques that will
help production, reduce manufacturing costs, improve quality, and shorten lead times.
The centers also monitor progress in technology, existing techniques, and introduces new
techniques. Process control and monitoring are also utilized within this system, to add
quality and generate information for statistical data required by customers. Inspection
systems within the centers are automatic, based on image and pattern recognition, and
continually developed to allow increased production speeds with superior quality. These
centers represent a move towards a more market-oriented and customer driven
production. The SKF Group plans to have the entire manufacturing organization based
on this CIM information and control system. When implementation in complete
production channels will be automated from entry of orders, setting of machine
specifications, continuous monitoring, to control during production runs.
On the SKF production floor instead of long production lines with large runs,
there are small self-contained autonomous groups, called production channels. These
channels have significantly reduced lead times for both development and production,
while reducing work in progress and inventory. Communication channels are shorter,
bottlenecks are eliminated and unnecessary steps in production are by passed.
Employees within these production channels have developed a broader knowledge base
and a stronger commitment to the SKF Group. The production channel allows team
members to share responsibility for quality, delivery time, and production flow. The
production floor has, therefore, seen a 50% reduction in lead-time and an 85% reduction
in customer complaints over the last three years. Once the channel members became
responsible for a bearing not a duty the change was obvious. Team members began
walking the line, examining the flow of work and suggestion boxes filled quickly which
led to a proficient restructuring of the plant arrangement. Subsequently, output increased
by 40% and job related accidents were reduced by 75%. All channel members know
their customer, product specifications, and the team objectives for quality, delivery time,
and production flow. The Channel Concept proves that the development of employees is
essential for exceptional manufacturing.
The primary industry that the SKF Group exists in is the manufacturing sector
that manufactures automatic and machine tools including metal cutting tools, milling
machines, lathes, and other production-line machinery and accessories, such as ball and
roller bearings, metal stamping foil and leaf, and other related tooling accessories. SKF’s
secondary industry is the manufacturing sector that fabricates, stamp or form iron, steel,
or other metals into products such as structured components, auto and aircraft assemblies,
tanks and vessels, and other industrial products. The sustained improvement in
automobile production since the second half of the 2001 fiscal has had a positive impact
on the performance of the SKF Group approximately 60% of the company's revenues is
garnered from the original equipment and the replacement segment. Due to a close
association with the automobile industry (major supplier to almost all top passenger car
producers), the company's financial performance tends to fluctuate in sync with
The SKF Group operates in many industries that are varied and often extremely
different from the bearing industry. The following are all of the industries in which SKF
operates: aerospace, auto-electrical appliances, automotive aftermarket, cars, electrical
motors, electrical power tools, fluid machinery, household appliances, industrial
electrical, industrial transmission, machine tools, materials handling, office machinery,
printing machinery, pulp and paper, railways, racing, and two wheelers.
The size of the world bearing market has been defined by the global sales of
bearings. Measured as such, SKF estimates the market to be worth approximately SEK
200 billion per year. The West European market potential is approximately 25% and the
North American market potential is about 30%. The third largest market is Japan with
15% market potential. Other markets that have a sizable local production of bearings are
Brazil, China, India and Russia. However, the bearing business is to a large degree
regional. This means that SKF’s main competitors differ depending on the region.
Strategy for success regardless of competitors SKF's Group strategy has three
main components whose purpose is to promote better profit and a steadier growth of
The elimination of businesses with unsatisfactory profit potential.
The development of the existing core business in the bearing and seals sectors.
The investment in new areas that, in the long run, will lead to an increase in the
growth of profit and volumes.
Roughly half of all SKF's production channels have now manufactured products
for at least a year without a single defect in any of them. This ranks as world-class quality
when you consider that we produce millions of units every day. SKF’s principal
competitors have the greater part of their production capacity in Germany, the USA or
Japan. SKF’s manufacturing is wider spread geographically, but with a concentration to
continental Europe, the USA and Sweden. SKF is today the world-leading bearing
company and the largest supplier to the markets in Europe, Latin America, Africa and the
Middle East. SKF also leads in Asia (excluding Japan). The other major international
bearing companies are INA (including the recently acquired FAG) in Europe, Timken
and Torrington (which is part of Ingersoll Rand) in the USA, and NSK, NTN and Koyo
The SKF Group is relying heavily on its brand equity to consistently charge
higher prices for its ball bearing products. However, Japanese and Eastern European
competitors are producing ball bearings that are of equal or higher quality and charging
less. SKF will not be able to continue this practice indefinitely as most company’s
specifically automobile manufacturers are attempting to employ cost reduction strategies.
Research and Development
Inability to increase market penetration
Inability to completely divest the steel division
Inability to reduce the cost of production
Inability to expand its business line although bearing life is increasing
Increased automobile production
Increased product development requiring bearings
Viable competitors that are producing bearings at a lower cost and price
The Future of SKF
The bearings of the future will be made of ceramic, a special grade composed of
silicon nitride. The rolling elements in the bearings are composed of ceramic powder
compressed under high pressure. This hybrid bearing is lighter and more durable than
steel bearings; therefore, they last longer, generate less friction, operate at increased
rotation speeds, tolerate extremely high temperatures, and require less lubrication. They
are used in the following: machine tools, pumps, electric motors, and inline skates.
The SKF Group has developed an integrated speed sensor for automobiles. The
newly developed sensors are protected against corrosion and road debris, which makes
them more reliable and durable than conventional sensors. Currently SKF engineers are
attempting to produce an intelligent bearing that can feed data to electronic control
systems, or even to car navigation systems.
Timkine and Torinton (USA) and FAG (Germany) are the competitors that SKF is
concerned about and utilizes for benchmarking. This is because these companies produce
basically the same quality product as the SKF Group, however, the SKF bearings and
priced much higher. SKF management is not concerned about the quality of the
competitor’s product and does not foresee a price reduction. This is due to its
competitive advantage: providing quality customer service through follow up, lifetime
guarantees, and superior logistics. SKF’s demand monitoring and demand predicting
software systems, inter-company cooperation closely monitors sales trends and projects
demand. SKF offers the most advanced maintenance and monitoring equipment to
ensure that its bearings keep performing at their peek.
The SKF Group has reduced the number of employees that work in management
and production yearly. The factory continues to become increasingly automated. The
Group intends to continue on this trend of small autonomous work groups and large
amounts of robotics. This increases the amount of marginal profits made from revenues
generated by production.
Automotive News Europe, April 8, 2002 v7 i7 p15. SKF focuses on partnerships,
Europe Intelligence Wire, Jan 29, 2003 pNA. SKF names new chief as quarterly profits
Executive Planet website, www.executiveplanet.com, June 9, 2003.
Industrial Distribution, March 2003 v92 i3 p18 (1). SKF acquired Twentieth Century
Lear, Elizabeth. Motion Systems Distributor, May-June 2002 v16 i3 p7 (1). SKF Group.
(On the Move)
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